Registered Foreign Portfolio Investors (RFPIs) are allowed to invest in India in the securities traded in both primary and secondary capital markets. These securities include shares, debentures, warrants, and units of mutual funds, government securities and derivative instruments.
The term RFPI (erstwhile FII, QFI) is defined as an institution established or incorporated outside India for making investment in Indian securities. RFPIs include Asset Management Companies, Pension Funds, Mutual Funds, Investment Trust as nominee companies, Incorporated/Institutional Portfolio managers or their power attorney holders, University Funds, Endowment Foundations, Charitable Trusts and Charitable Societies.
RFPIs, must register with Securities and Exchange Board of India (SEBI) and shall comply with the Exchange Control Regulations of RBI.
Policy on RFPI Investment
Main features of the policy on investment by RFPI are :
a) RFPIs are required to allocate their investment between equity and debt instruments in the ratio of 70:30. However, it is also possible for an RFPI to declare itself a 100% debt RFPI in which case it can make its entire investment in debt instruments.
b) RFPIs can buy/sell securities on Stock Exchanges. They can also invest in listed and unlisted securities outside Stock Exchanges where the price has been approved by RBI.
c) No individual RFPI/sub-account can acquire more than 10% of the paid up capital of an Indian company.
d) All RFPIs and their sub-accounts taken together cannot acquire more than 24% of the paid up capital of an Indian Company.
e) Indian Companies can raise the above mentioned 24% ceiling to the Sectoral Cap / Statutory Ceiling as applicable by passing a resolution by its Board of Directors followed by passing a Special Resolution to that effect by its General Body in terms of Press Release dated Sept.20, 2001 and FEMA Notification No.45 dated Sept. 20, 2001.
No permission from RBI is needed so long as the RFPIs purchase and sell on recognized stock exchange. All non-stock exchange sales/purchases require RBI permission.
Portfolio investments by NRIs
NRIs/PIOs are permitted to purchase/sell shares/convertible debentures of Indian companies on Stock Exchanges under Portfolio Investment Scheme. For this purpose, the NRI/PIO has to apply to a designated branch of a Bank, which deals in Portfolio Investment. All the sale/purchase transaction are routed through the designated branch. An NRI can purchase shares up to 5% of the paid up capital of an Indian company. All NRIs taken together cannot purchase more than 10% of the paid up value of the company. This limit can be increased by the Indian company to 24% by passing a General Body resolution. Investment can be made both on repatriation basis or non-repatriation basis. The sale of shares will be subject to payment of applicable taxes.
Details regarding portfolio investment scheme available at the website of RBI (www.rbi.org.in) and Security & Exchange Board of India (SEBI) (www.sebi.gov.in)
For FAQ’s : http://www.rbi.org.in/scripts/FAQView.aspx?Id=26