FPI Norms
SEBI tweaks FPI norms for reclassifying investments over 10% in a co as FDI
This story was originally published at 23:17 IST on 11 November 2024
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MUMBAI – The Securities and Exchange Board of India Monday said it has made changes to the rules regarding reclassification of foreign portfolio investments to foreign direct investment. If the investments made by a foreign portfolio investor and its investor group reach 10% or more than that of the total paid up equity capital of a company, and the FPI intends to reclassify its FPI holdings as foreign direct investment, the rules under the Foreign Exchange Management Act shall apply.
The custodian of the FPI shall report these investments to SEBI and freeze further purchases in the company, till completion of the reclassification, SEBI said in a circular Monday. SEBI said the circular was effective immediately. Earlier, the FPI could reclassify the investments as FDI, but was allowed to sell the shares.
The process of classifying investments as FDI will involve the FPI requesting its custodian to transfer investments in the company from its FPI dematerialisation account to its demat account maintained for holding FDI investments. The custodian shall process the request for reclassification, after checking all rules prescribed by the Reserve Bank of India were followed in all respects.
In case a FPI does not wish to reclassify investments in the company as FDI, it will have to divest its holdings in excess of the prescribed threshold by the regulator within five trading days. End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Reported by Gopika Balasubramanium
Edited by Deepshikha Bhardwaj
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