India plans to raise foreign individual investment cap to 10%: Report
Foreign portfolio investors (FPIs) have withdrawn more than $28 billion from Indian stocks since September when the NSE Nifty 50 reached its highest point because of poor earnings reports and high market prices and U.S. tariff threats.
The Indian government will extend benefits that were limited to overseas Indians to all foreign investors and increase investment ceilings to attract foreign capital according to officials. The central bank requested the government through a letter to implement these changes as it noted disruptions in capital inflows.
The finance ministry along with Reserve Bank of India (RBI) and Securities and Exchange Board of India (SEBI) failed to answer the submitted inquiries.
Under the Foreign Exchange Management Act (FEMA) the proposed increase in foreign individual investor limits for listed companies reaches 10% from the current 5% limit for NRIs and OCIs. A government official stated that Schedule III will receive expansion to include all foreign individuals including those who are not NRIs or OCIs.
The RBI intends to increase the maximum overseas individual investor stake in a listed firm to 24% according to official statements. The government together with RBI and SEBI continue their discussions toward completion. The RBI and government support the change but SEBI expressed doubts about implementation because the 10% individual stake combined with associates might reach 34% which would activate takeover rules without proper detection. Indian law demands an open offer when an investor reaches 25% ownership.
The official explained that regulators are working to refine the rules which will address compliance loopholes.
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