New Delhi [India], November 11 : The Reserve Bank of India on Monday announced that a foreign portfolio investor (FPI) investing in excess of the prescribed 10 per cent limit in a company, shall have the option of divesting their holdings or reclassifying such holdings as foreign direct investment (FDI).
By far, rules provide that investment made by FPI along with its investor group shall be less than 10 per cent of the total paid-up equity capital on a fully diluted basis.
An operational framework for such reclassification of foreign portfolio investment by FPI to FDI has been put out today by the RBI.
In case the FPI intends to reclassify its foreign portfolio investment into FDI, the FPI shall obtain approvals/concurrence from the government and the concerned Indian investee company.
These directions will become operative with immediate effect, RBI said.
The facility of reclassification shall not be permitted in any sector prohibited for FDI.
The FPI shall also clearly articulate its intent to reclassify existing foreign portfolio investment held in a company into FDI and shall provide a copy of the necessary approvals and concurrence.
Once the excess FPI is considered as FDI, RBI said it shall continue to be treated as FDI even if the investment falls to a level below ten per cent subsequently.
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