Compliance of FDI norms: RBI to unveil report submission mechanism soon

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  1. The Reserve Bank of India(RBI) is expected to come up with a mechanism for e-commerce marketplaces to submit their reports proving compliance with the FDI guidelines.
  2. According to the FDI norms by the Department for Promotion of Industry and Internal Trade (DPIIT),an e-commerce marketplace entities are required to furnish a certificate along with a report of statutory auditor to the RBI confirming compliance of the guidelines every year for the preceding financial year.
  3. In 2018,DPIIT had tightened the foreign direct investment (FDI) rules for ecommerce companies
  4. The rules were (a)If an entity is owned by an e-commerce marketplace(ECM),it cannot sell its products on the platform run by the same ECM (b)A single vendor can’t account for more than 25% of sales in an ECM or platform and (c)The rules puts curbs on exclusive partnerships with brands or providing favorable services to a few vendors.
  5. In 2016,the government had permitted 100% FDI in the marketplace model of e-commerce,but not in the inventory-based model.In a marketplace model,ECMs act as platform for vendors to sell their products.In the inventory-based model,ECMs own and sell products.
  6. These rules was directed at protecting small vendors on e-commerce websites.It seeks to ensure small players selling on the portals are not discriminated against in favour of vendors in which e-commerce companies have a stake.It will also ensure a level playing field for all vendors looking to sell on the e-commerce portals.