The Reserve Bank of India (RBI) has relaxed norms for foreign portfolio investors (FPIs) to reclassify their investments as foreign direct investment (FDI) when they exceed the 10% ownership limit in an Indian company. This would further enhance the ease of doing business in India.
Previously, FPIs had to either divest their excess holdings or seek a cumbersome reclassification process. Now, the central bank has streamlined this process, providing a clear pathway for FPIs to retain their investments in India, subject to certain conditions.
To reclassify their investment, FPIs will need to obtain necessary approvals from the government and the Indian company. The entire process, including reporting and transfer of shares, must be completed within a specified timeframe.
Once reclassified as FDI, the investment will be governed by FDI regulations and will continue to be treated as FDI even if the ownership falls below 10% in the future.
This move is expected to provide more flexibility to FPIs and encourage further foreign investments in India.