Foreign Direct Investments
Foreign investment is freely permitted in almost all the sectors. Foreign Direct Investments (FDI) can be made under two routes-Automatic Route and Government Route. Under the Automatic Route, the foreign investor or the Indian company does not require any approval from RBI or from the Government of India for the investment. Under the Government Route, prior approval of the Foreign Investment Promotion Board (FIPB) ,Government of India, Ministry of Finance is required.
Investments through Stock Exchanges
Foreign Institutional Investors (FIIs), Non-Resident Indians (NRIs), and Persons of Indian Origin (PIOs) are allowed to invest in the primary and secondary capital markets in India through the Portfolio Investment Scheme (PIS). Under this scheme, FIIs/NRIs/PIOs can acquire shares/debentures of Indian companies through any stock exchange in India.
Investment in Euro Issues/Mutual Funds Floated Overseas
- The ceiling for overall investment for FIIs is 24 per cent of the paid up capital of the Indian company and 10 per cent for NRIs/PIOs. The limit is 20 per cent of the paid up capital in the case of public sector banks.
- The ceiling of 24 per cent for FII investment can be raised up to sectoral cap/statutory ceiling, subject to the approval of the board and the general body of the company passing a special resolution to that effect. And the ceiling of 10 per cent for NRIs/PIOs can be raised to 24 per cent subject to the approval of the general body of the company passing a resolution to that effect.
- The ceiling for FIIs is independent of the ceiling of 10 per cent/24 per cent for NRIs/PIOs.
- The equity shares and convertible debentures of the companies within the prescribed ceilings are available for purchase under PIS subject to:
- the total purchase of all NRIs/PIOs both, on repatriation and non-repatriation basis, being within an overall ceiling limit of (a) 24 per cent of the company's total paid up equity capital and (b) 24 per cent of the total paid up value of each series of convertible debenture; and
- the investment made on repatriation basis by any single NRI/PIO in the equity shares and convertible debentures not exceeding five per cent of the paid up equity capital of the company or five per cent of the total paid up value of each series of convertible debentures issued by the company.
Foreign investors can invest in Euro issues (ADRs/GDRs/FCCBs) of Indian companies and in India-specific funds floated abroad.
Foreign brokers upon registration with the SEBI are allowed to route the business of their registered FII clients through the members of any stock exchange. Guidelines for the same have been issued by SEBI.
Asset Management Companies / Merchant Banking
Foreign participation (full/part) in Asset Management Companies and Merchant Banking companies is permitted.