Introduction
The
government notified changes in the FDI policy under which there will be a
composite cap on foreign investment in various sectors, except in banking and
defence segments for simplification of
Foreign Direct Investment policy.
government notified changes in the FDI policy under which there will be a
composite cap on foreign investment in various sectors, except in banking and
defence segments for simplification of
Foreign Direct Investment policy.
Composite Caps introduced
The government on 30/07/2015 notified
changes in the FDI policy under which there will be a composite cap on overseas
investment in various sectors, except in the banking and defence segments.
changes in the FDI policy under which there will be a composite cap on overseas
investment in various sectors, except in the banking and defence segments.
The press note issued by the Department
of Industrial Policy and Promotion (DIPP) said that there will not no
sub-limits of portfolio investment and other kinds of foreign investments in
commodity exchanges, credit information companies, infrastructure companies in
securities market and power exchanges.
of Industrial Policy and Promotion (DIPP) said that there will not no
sub-limits of portfolio investment and other kinds of foreign investments in
commodity exchanges, credit information companies, infrastructure companies in
securities market and power exchanges.
However, in private sector banking,
there will a sub-limit of 49 per cent on portfolio investment within the
overall foreign investment limit of 74 per cent, it said.
there will a sub-limit of 49 per cent on portfolio investment within the
overall foreign investment limit of 74 per cent, it said.
Similarly, in case of defense sector,
the portfolio investment has been capped at 24 per cent under the automatic
route.
the portfolio investment has been capped at 24 per cent under the automatic
route.
There are other sectors which will also
be benefited from this concept including, scientific journals, credit
information companies, asset reconstruction companies, and power exchanges.
be benefited from this concept including, scientific journals, credit
information companies, asset reconstruction companies, and power exchanges.
The press note clarified that the funds
flow through debt instruments like foreign currency convertible bonds (FCCBs)
and depository receipts (DRs) will not be treated as foreign investment till
they are converted into equity.
flow through debt instruments like foreign currency convertible bonds (FCCBs)
and depository receipts (DRs) will not be treated as foreign investment till
they are converted into equity.
It is clarified that the equity holding
by a person resident outside India resulting from conversion of debt instrument
will be reckoned as foreign investment.
by a person resident outside India resulting from conversion of debt instrument
will be reckoned as foreign investment.
It is also mentioned in the note that
the aggregate FII/FPI/QFI investment which is made individually or made in
conjunction with other kind of foreign investment shall not exceed
sectoral/statutory cap.
the aggregate FII/FPI/QFI investment which is made individually or made in
conjunction with other kind of foreign investment shall not exceed
sectoral/statutory cap.
The press note further said that the portfolio
investment up to 49 per cent or sectoral/statutory cap, whichever is lower,
will not need government approval, if they do not result in transfer of
ownership or control from Indian citizens to non-Indian entities.
investment up to 49 per cent or sectoral/statutory cap, whichever is lower,
will not need government approval, if they do not result in transfer of
ownership or control from Indian citizens to non-Indian entities.
The note also clarifies that the onus of compliance of
above provisions will be on the investee company.
