India raises investment limits for foreign individuals

The Reserve Bank of India (RBI) is planning to double the foreign individual investment limit in listed companies from 5% to 10%.

The Reserve Bank of India is expected to raise the limit on foreign individual investment in listed companies from 5% to 10%. Illustrative photo.

The Reserve Bank of India (RBI) is planning to double the limit on foreign individual investment in listed companies from 5% to 10% to attract more capital inflows, according to government officials and documents reviewed by Reuters.

The move comes as foreign portfolio investors (FPIs) have pulled out more than $28 billion from Indian equities since September 2024 due to concerns over poor returns, high valuations and the possibility of US tariffs.

Currently, India allows only overseas Indians to invest up to 5% in a listed company under the Foreign Exchange Management Act (FEMA). However, under the new plan, all foreign individual investors will be allowed to hold up to 10%.

Additionally, the Reserve Bank of India will also raise the aggregate ownership limit of all foreign individual investors in a listed company from 10% to 24%.

“We are expanding the scope of the regulation to facilitate more foreign investors to enter the Indian market,” said a government official.

While the government and central bank have been supportive of easing investment limits, the Securities and Exchange Board of India (SEBI) has expressed concerns about its ability to monitor and ensure investors comply with regulations.

According to SEBI, if a foreign investor and its related parties hold more than 34% of the shares of a company, they can be considered to be carrying out a corporate takeover. In such a case, the investor may be forced to make an offer to buy back the shares from the minority shareholders, as per the provisions of Indian securities laws.

“We are reviewing regulations to prevent foreign investors from taking advantage of legal loopholes to take over businesses,” a government official said.

The plan to raise the investment limit for foreign individuals is currently in the final stages of discussion between the government, RBI and SEBI before it is officially issued.

Source: https://congthuong.vn/an-do-nang-han-muc-dau-tu-cho-ca-nhan-nuoc-ngoai-380275.html