This is how FPIs will be able to hold more than 10% stake in a listed company

New Delhi|Foreign portfolio investors (FPIs) investing in a company in excess of the 10 per cent limit set shall have the option of selling their holdings or reclassifying such holdings as foreign direct investment (FDI). The Reserve Bank of India announced this on Monday.

As per the rule so far, investments made by FPI are entirely less than 10 per cent of the total paid-up equity capital. RBI on Monday announced a new framework to convert foreign portfolio investment by FPIs into FDI.

Accordingly, if FPI intends to reclassify its foreign portfolio investment into FDI, FPI will have to obtain approval/consent from the Government and the concerned Indian invested company.

According to RBI FPIs will also have to clearly express their intention to reclassify existing foreign portfolio investments held in a company into FDI and provide a copy of the necessary approvals and consents. RBI said that once additional FPIs are treated as FDI, it will continue to be treated as FDI, even if the investment later falls below ten per cent.