The circular provides an operational framework for reclassification of Foreign Portfolio Investment (FPI) to Foreign Direct Investment (FDI) as per the Foreign Exchange Management (Non-debt Instruments) Rules, 2019. It allows FPIs investing beyond the prescribed 10% limit of paid-up equity capital to reclassify such holdings as FDI, subject to conditions. The key points are: reclassification not permitted in FDI-prohibited sectors; necessary approvals from government and investee company's concurrence required; reporting requirements specified; custodian to transfer shares from FPI to FDI demat account post reporting; entire FPI investment treated as FDI post reclassification; reclassification/divestment timeline prescribed; post reclassification, investment governed by FDI rules.
The circular provides an operational framework for reclassification of Foreign Portfolio Investment (FPI) to Foreign Direct Investment (FDI) as per the Foreign Exchange Management (Non-debt Instruments) Rules, 2019. It allows FPIs investing beyond the prescribed 10% limit of paid-up equity capital to reclassify such holdings as FDI, subject to conditions. The key points are: reclassification not permitted in FDI-prohibited sectors; necessary approvals from government and investee company's concurrence required; reporting requirements specified; custodian to transfer shares from FPI to FDI demat account post reporting; entire FPI investment treated as FDI post reclassification; reclassification/divestment timeline prescribed; post reclassification, investment governed by FDI rules.
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