What changed
RBI amended the Foreign Direct Investment Scheme to permit foreign investment in infrastructure companies in securities markets, including stock exchanges, depositories, and clearing corporations. The total foreign investment cap is set at 49%, with a separate FDI limit of 26% and FII limit of 23%. FDI requires prior FIPB approval, while FII is allowed only through secondary market purchases.
What it means for you
Banks acting as AD Category-I must update their compliance frameworks to handle these new caps and approval requirements for foreign investments in securities market infrastructure. This opens a structured channel for foreign capital into Indian market utilities, potentially enhancing liquidity and global integration. Lenders facilitating such investments need to ensure adherence to SEBI regulations and FIPB approval processes.
What you must do
- Inform all constituents and customers about the new foreign investment caps and conditions for securities market infrastructure companies.
- Update internal systems to monitor and enforce the separate FDI (26%) and FII (23%) limits within the overall 49% cap.
- Ensure that any FDI transactions in these entities are processed only after verifying prior FIPB approval.
- Restrict FII investments in these companies to secondary market purchases only, as per the circular.
- Coordinate with SEBI regulations and maintain records for compliance with FEMA provisions.
Who it affects
AD Category-I banks, Foreign investors (FDI and FII), Stock exchanges, depositories, and clearing corporations, SEBI and FIPB
What is the total foreign investment cap allowed in securities market infrastructure companies?
The total foreign investment cap is 49%, with a separate FDI limit of 26% and FII limit of 23%.
Do FII investments require prior approval under this circular?
FII investments are allowed only through secondary market purchases and do not require FIPB approval, but must comply with SEBI regulations.
Which entities are covered under this circular?
The circular covers infrastructure companies in securities markets, specifically stock exchanges, depositories, and clearing corporations.