'Treat foreign investment of 10%-plus in listed firms as FDI'
Our Bureau
Outlay below that is foreign portfolio investment, says Mayaram panel
New Delhi, June 20:
To remove the ambiguity in the definition of foreign direct investment, a Government panel has said that any overseas investment of 10 per cent or more in a listed Indian company qualifies as FDI. There is no such minimum for an unlisted company.
The panel, headed by Arvind Mayaram, Secretary, Economic Affairs, has suggested that foreign investments below 10 per cent be treated as Foreign Portfolio Investment (FPI). FPI is the new combination of various portfolio investors, including Foreign Institutional Investors and Qualified Foreign Investors.
In its report, the panel said that an investor can hold an investment in a company either as FDI or FPI, but not both. The report, which was made public on Friday, states that 'non-repatriable' investments by Non-Resident Indians should be treated as domestic investment. The report, if accepted by the Government, will lead to legislative changes in the FDI rules. "Foreign investment of 10 per cent or more through eligible instruments made in an Indian listed company would be treated as FDI. All existing FDI below the threshold limits made under the FDI route will, however, continue to be treated as FDI," it said.
FDI limits
The Government has set various limits for FDI in different sectors. For example, for multi-brand retail, it is 51 per cent while for insurance, it is 26 per cent.
The panel suggested that investment below 10 per cent as FDI could be possible but only with a caveat that the foreign investment "stake is raised to 10 per cent or beyond within one year from the date of the first purchase". It also said that the obligation to fulfil that condition would be on the company.
"If the stake is not raised to 10 per cent or above, then the investment will be treated as a portfolio investment," the report said. It added that in case an existing FDI falls below 10 per cent, it can continue to be treated as FDI without any obligation to restore it to 10 per cent or more, as the original investment was an FDI. The panel said any investment by way of equity shares, compulsory convertible preference shares/debentures less than 10 per cent of the post-issue paid-up shares of a company will be treated as FPI.
(This article was published on June 20, 2014)
To step up $ inflows, RBI allows foreign portfolio investors to hedge currency risks
Our Bureau
Mumbai, June 20:
In a significant move that will attract dollar inflows into the country, the Reserve Bank of India on Friday said foreign portfolio investors (FPIs) can hedge onshore currency risks arising out of their exposure to the Indian debt and equity markets.
For this purpose, they can access the currency futures or exchange traded currency options market. FPIs include foreign institutional investors and qualified foreign investors.
Further, the central bank announced two more liberalisation measures that will see increased participation of residents in the currency futures and exchange traded currency options market (together known as exchange traded currency derivatives).
Firstly, the RBI aligned some of the rules pertaining to residents' (including exporters and importers) participation in exchange traded currency derivatives with that for FPIs.
Secondly, the banks that are authorised to deal in foreign exchange have also been allowed to undertake proprietary trading in the exchange traded currency derivatives (ETCD).
The RBI said FPIs and residents (domestic participants) can take a long (bought) as well as short (sold) position up to $10 million (or equivalent) per exchange without having to establish the existence of any underlying exposure.
An FPI or a domestic participant wanting to take a position exceeding $10 million in ETCD market will have to establish the existence of an underlying exposure.
In the case of banks, the RBI said they can also net/ offset their positions in the ETCD market against the positions in the over-the-counter market.
According to NS Venkatesh, Executive Director & Head – Treasury, IDBI Bank, FPIs, who used to go offshore to hedge their currency risks arising from investments in the debt and equity markets in the country, will now come onshore to hedge their currency risks. This is a positive development for the domestic currency.
"Earlier, some foreign investors refrained from investing in the Indian market as their investment rules did not permit investment in a market where there is no onshore hedging facility. With the RBI allowing FPIs to hedge their currency risk onshore, these investors will enter India," he said.
A currency future is a futures contract to exchange one currency for another at a specified date in the future at a price (exchange rate) that is fixed on the purchase date.
Exchange traded currency option is a standardised product that gives the buyer the right but not the obligation to buy or sell the underlying (currency exposure) at a stated date and at a stated price.
(This article was published on June 20, 2014)
--
Company Secretary
Chennai
93810 11200
― Stephen Richards, Think Your way to Success: Let Your Dreams Run Free
This mail and its attachments (if any) are confidential information intended for persons to whom the email is planned for delivery by the sender. If you have received this mail in error please notify the sender of the error by forwarding the email and its attachments (if any) and then deleting the mail received in error and the relevant email trail in this connection without making any copies or taking any prints.
__._,_.___
No comments:
Post a Comment