BIG BOOST | Right measues to accelerate capital inflows 

FPJ News Service mumbai

The Reserve Bank of India (RBI) is set to double the  investment cap for individual foreign investors in listed companies to 10% to boost capital inflows, according to two senior government officials and documents reviewed by Reuters. Foreign portfolio investors (FPIs), pressured by poor earnings, high valuations and prospects of US tariffs, have pulled more than $28 billion of Indian stock markets since September’s record high in the benchmark NSE Nifty 50, Reuters reported on Thursday. 

To boost foreign investment, India is widening to all foreign investors the benefits it had until now, which were restricted to overseas Indians, while also raising applicable investment limits, the officials said. “It is felt that these proposals may be implemented as early as possible,” the central bank told the government in a letter last week, pointing to disruption in capital inflows among recent developments in the external sector.

Emails seeking comment from the finance ministry, the central bank, and the market regulator, the Securities and Exchange Board of India (SEBI), did not get any response. The plans envisage allowing all foreign individual investors to invest a maximum of 10% in a listed company, the document showed.That is up from the 5% holding in an Indian company allowed to overseas Indian citizens by special rules under the FEMA regulations.

“Current foreign exchange management rules only mention NRIs and OCIs under Schedule III,” the second government official said, speaking on condition of anonymity. “We are broadening this to include all individual foreign investors.” The central bank, the Reserve Bank of India (RBI), will also raise to 24% the combined holding limit for all overseas individual investors in an Indian listed company, from 10% now, the officials added.