Investing in Indian stocks is now easier for overseas investors
What's the story
The Indian government has amended its foreign investment rules, allowing all individual Persons Resident Outside India (PROIs) to invest in shares of listed Indian companies through the Portfolio Investment Scheme (PIS). This move was previously limited to Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs). The changes were notified by the Department of Economic Affairs through amendments to the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019.
Enhanced limits
Investment limits for overseas individuals raised
The revised rules have also doubled the investment limit for an individual overseas investor to 10% of the paid-up equity capital of a listed Indian company. The aggregate limit for all such overseas individual investors has also been raised to 24%, from the earlier cap of 10%. This change is expected to attract more foreign capital into India's stock market.
Alignment
Aligning overseas individual investors with FPIs
The amended rules also align the treatment of overseas individual investors with existing norms applicable to Foreign Portfolio Investors (FPIs). This means that investments breaching the 10% threshold will have to be divested within five trading days. If not divested, the entire holding will be reclassified as Foreign Direct Investment (FDI), and further portfolio investments in that company would be barred for the investor.
Safety measures
Safeguards for investments from neighboring countries
Despite the liberalization, the government has retained safeguards for investments from countries sharing a land border with India. Any investment resulting in transfer of ownership or control of a listed Indian company to entities or citizens of such countries will require prior government approval.