MUMBAI: RBI, in consultation with govt and Sebi, has introduced a framework whereby foreign portfolio investment (FPI) can be reclassified as foreign direct investment (FDI) once it crosses the threshold of 10% holding in a company. RBI has said that this aims to improve the ‘ease of doing business’ for foreign investors.
“This initiative will offer greater flexibility to FPIs to transit to a more strategic and enduring engagement with Indian companies. It also underscores govt’s commitment to fostering a conducive environment for foreign investment,” Sunil Kumar, tax partner at EY India, said. The move comes at a time when FPIs have been major sellers in the Indian market, with sales of Rs 94,000 crore in Oct 2024 alone.
The new regulations, while providing a framework, don’t do away with existing limits under law. “This reclassification is subject to adherence to FDI norms, including sectoral caps, seeking Indian investee company’s concurrence and the necessity of obtaining govt approval, where applicable,” Kumar said.
The new circular primarily outlines the process for an FPI to convert their investment into FDI when it exceeds the 10% ownership threshold. The earlier circular covered aspects such as modes of payment for different types of investments, the reporting requirements and the regulations related to specific types of investments.
FPIs are considered investments in financial assets and offer a simpler registration process with Sebi.
Rupee falls to new low of 84.39 vs $
The rupee fell to a new low against the dollar on Monday, as anxieties surrounding the recent US election results and persistent foreign capital flight from Indian equities exerted downward pressure on the currency. Opening at 84.37, the rupee further weakened to breach the 84.39 mark, surpassing its previous record low of 84.38. Dealers said that sustained intervention by RBI is ensuring that decline in the value of the currency is calibrated.
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