Department of Industrial Policy and Promotion (‘DIPP) under the Ministry of Commerce and Industry has issued Press Note 1 (2017 Series) vide D/o IPP File No. 9/3/2016-FC.I dated 20th February, 2017 amending Consolidated FDI Policy, with respect to foreign direct investment in securities market.
Existing Position
Foreign Investment in securities markets is presently allowed upto 49 % under automatic route subject to certain restriction which includes that Foreign Institutional Investors (‘FIIs’)/ Foreign Portfolio Investors (‘FPIs’) are allowed to invest in securities market only through purchases. In addition, non-resident investor or entity, including the persons acting in concert will not hold more than 5 % of equity in commodity exchanges. Further foreign investment in the commodity exchanges will be subject to the guidelines of Central Government/ SEBI from time to time.
Revised position
Although the revised position also specifies for identical sectoral cap yet the restrictions ought to have been made uniform for all the infrastructure companies in Securities Market. Under the revised position, the foreign investments in such infrastructure companies have been made in line with the SEBI regulations i.e. Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2012, Securities and Exchange Board of India (Depositories and Participants) Regulations, 1996 or any other guidelines/ regulations issued by Central Government, RBI or SEBI. Thus any investment including the investment by FPIs, shall be made in compliance of these regulations.
Further, clarity has also been made with respect to meaning of the terms used in connection with such foreign investment which stipulates to adopt the definitions defined in concerned act or regulations in case the same has not been defined in the FDI Policy.