Finance Minister Nirmala Sitharaman on September 5 dropped a big hint on Centre's plans for FDI, FPI liberalisation.
"I don't want to give any headline but certainly we are looking at every aspect of reform," said Sitharaman on foreign portfolio investment (FPI) and foreign direct investment (FDI) liberalisation during an interview to Network 18 Group Editor-In-Chief Rahul Joshi.
Currently, an FPI or an investor group can hold only up to 10% equity in a listed company. More than 10% is allowed through FDI.
In November, the Reserve Bank of India (RBI) introduced an operational framework allowing the reclassification of FPI as FDI if holdings exceed the prescribed threshold.
As per existing regulations, investments by an FPI and its investor group must not surpass 10% of an Indian company’s total paid-up equity on a fully diluted basis.
Should this limit be breached, the concerned FPI may either divest holdings or reclassify them as FDI, provided conditions set by the RBI and Securities and Exchange Board of India (SEBI) are met.
FDI involves a firm or individual from one country investing directly in business operations or assets in another country. In contrast, FPI refers to investment in financial assets or securities, such as stocks or bonds, issued in a foreign country.
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