What changed
RBI clarified that companies raising aggregate FII limits from 24% to sectoral caps or NRI limits from 10% to 24% must immediately intimate RBI, along with a company secretary certificate confirming compliance with FEMA and FDI policy. No change in the monitoring mechanism: RBI continues daily tracking with a 2% cut-off point below ceilings, issuing cautions and stop-purchase orders.
What it means for you
Banks must ensure their corporate clients understand the mandatory intimation requirement when increasing FII/NRI investment limits. The 2% buffer mechanism remains active, meaning designated bank branches must halt purchases once the cut-off is reached, pending RBI clearance on a first-come-first-served basis. This impacts how banks manage client investment flows and compliance reporting.
What you must do
- Advise corporate clients to submit immediate intimation to RBI when raising FII/NRI limits, with a company secretary compliance certificate.
- Ensure designated bank branches monitor FII/NRI investment levels daily and adhere to RBI's caution and stop-purchase instructions.
- Update internal systems to reflect the 2% cut-off points and first-come-first-served clearance process for limit breaches.
- Communicate these requirements to customers and constituents without delay.
Who it affects
Category-I Authorised Dealer banks, Indian companies raising FII/NRI investment limits, FIIs, NRIs, and PIOs investing under Portfolio Investment Scheme, Designated bank branches handling FII/NRI transactions
What is the new intimation requirement for companies?
Companies raising FII limits above 24% to sectoral caps or NRI limits from 10% to 24% must immediately inform RBI, attaching a company secretary certificate confirming compliance with FEMA and FDI policy.
How does RBI monitor FII/NRI investment ceilings?
RBI monitors daily and sets a cut-off point 2% below the actual ceiling. Once net purchases hit this cut-off, RBI cautions banks to stop purchases without prior approval. Clearances are then given on a first-come-first-served basis until the limit is reached.
What should banks do when a caution is issued?
Designated bank branches must stop purchasing equity shares for FIIs/NRIs/PIOs in that company without RBI approval. Link offices must report proposed purchases to RBI for clearance.