In consultation with the Government of India and SEBI, the Reserve Bank of India has finalised an operational framework for reclassification of Foreign Portfolio Investment made by Foreign Portfolio Investors (FPI) to Foreign Direct Investment (FDI) under Foreign Exchange Management (Non-debt Instruments) Rules, 2019 in case of any breach of the investment limit by the FPIs concerned. This would further enhance the ease of doing business in India.
The FPI concerned shall obtain the following approvals/concurrence before intending to acquire equity instruments beyond the prescribed limit:
- Necessary approvals from the Government, as applicable, including approvals required in case of investment from land bordering countries and ensure that the acquisition beyond prescribed limit is made in accordance with the provisions applicable for FDI, which means that investment should be in adherence to entry route, sectoral caps, investment limits, pricing guidelines, and other attendant conditions for FDI under Schedule I to the Rules.
- Concurrence of the Indian investee company concerned for reclassification of the investment to FDI to enable such company to ensure compliance with conditions pertaining to sectors prohibited for FDI, sectoral caps and government approvals, wherever applicable, under the Rules.
