INDIA: Monitoring of Foreign Investment Limits in Listed Indian Companies

Wednesday May 2 2018

Foreign Investment in India is regulated in terms of clause (b) of sub-section 3 of section 6 and  section 47 of the Foreign Exchange Management Act, 1999 (FEMA) read with Foreign Exchange Management  (Transfer  or  Issue  of  a  Security  by  a  Person  resident  Outside  India)  Regulations, 2017. FEMA prescribes the various  foreign  investment  limits  in  listed  Indian  companies.  These include the aggregate FPI limit, the aggregate NRI limit and the sectoral cap. The RBI Master Direction (FED Master  Direction  No. 11/2017-18)dated  January  04,  2018 provides  a  compilation  of  the instructions issued on Foreign Investment in India and its related aspects under FEMA.

As  per  FEMA,  the  onus  of  compliance  with  the  various  foreign  investment  limits  rests  on  the Indian company. In order to facilitate the listed Indian companies to ensure compliance with the various foreign investment limits, SEBI in consultation with RBI has decided to put in place a new system for monitoring the foreign investment limits.

The  depositories (NSDL  and  CDSL)shall  put  in  place  the  necessary  infrastructure  and  IT systems  for  operationalizing  the  monitoring  mechanism. The Stock Exchanges (BSE,NSE and  MSEI)shall  also  put  in  place the  necessary  infrastructure  and  IT  systems for  disseminating  information  on  the  available  investment  headroom  in  respect  of  listed Indian companies.

The depositories shall issue the necessary circulars and guidelines for collecting data on foreign investment from listed companies.  The  new  system  for  monitoring  foreign  investment  limits  in  listed  Indian  companies  shall  be  made  operational  on  May  01,  2018. The  existing  mechanism  for  monitoring  the  foreign investment  limits  shall  be  done  away  with once the  new  system  is  operationalized.

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