India Expands Foreign Portfolio Investments with New Amendments

The Central Government has amended the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019. These changes facilitate overseas individual investments in Indian firms, raising investment ceilings through stock exchanges. This move aims to boost foreign inflows and enhance market liquidity, benefiting select large-cap stocks and banks.

The Indian government has revised the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019, according to a June 12 notification from the Department of Economic Affairs. This amendment now allows individual foreign investors to purchase and sell equity in listed Indian companies via stock exchanges, broadening access and raising investment ceilings through the portfolio route.

The legal update extends existing provisions for Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs) to include 'an individual person resident outside India.' However, these investors can own less than ten percent of any listed Indian company's total paid-up equity capital, while the collective foreign individual ownership cap stands at twenty-four percent.

The government aims to draw greater foreign portfolio inflows into Indian equities, enhancing liquidity and accessibility, particularly for large-cap stocks, banks, and firms with limited foreign shareholding. The amendments maintain regulatory safeguards, requiring prior approval for investments from bordering countries.