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RBI and SEBI introduced a framework for the reclassification of FPI to FDI

Published on November 12, 2024
Current Context: The Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI) introduced a framework on November 11, 2024.
RBI and SEBI introduced a framework for the reclassification of FPI to FDI
  • Purpose:
    • Provides a mechanism for Foreign Portfolio Investors (FPIs) exceeding the 10% equity limit in an Indian company to reclassify their investments as Foreign Direct Investment (FDI).
  • Conditions for Reclassification:
    • Requires meeting specific conditions and obtaining necessary approvals.
  • Completion Timeline:
    • Reclassification must be completed within five trading days from the date of the trade that breaches the limit.
  • This framework aims to streamline investment processes and ensure regulatory compliance for foreign investors in the Indian market.

Question:

1 What is the main purpose of the framework introduced by the RBI and SEBI on November 11, 2024, for Foreign Portfolio Investors (FPIs)?

  • A) To impose higher taxes on FPIs exceeding the equity limit
  • B) To encourage FPIs to increase their stake in Indian companies
  • C) To allow FPIs exceeding the 10% equity limit to reclassify their investments as Foreign Direct Investment (FDI)
  • D) To reduce foreign investment in Indian companies
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