The Department of Industrial Policy and Promotion of the Government of India (GoI) amended the Consolidated Foreign Direct Investment Policy Circular of 2016 (FDI Policy) and revised the guidelines in relation to investments made into infrastructure company in the securities market vide a notification dated 20 February 2017 (Revised Policy).
While the erstwhile guidelines (i) allowed investments by foreign institutional investors and foreign portfolio investors (FPI) only through purchases in the secondary market; (ii) did not permit any non-resident entity/ investor, including persons acting in concert, from holding more than 5% (five per cent) of the equity in commodity exchanges; and (iii) subjected the foreign investment in commodity exchanges to guidelines of the GoI and the Securities and Exchange Board of India (SEBI), the Revised Policy changes the aforesaid conditions for foreign investments.
Accordingly, foreign investments, including investment by FPIs shall now be subject to the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2012, the SEBI (Depositories and Participants) Regulations, 1996, and such other regulations or guidelines as may be issued by the GoI, SEBI and the Reserve Bank of India from time to time. Further, the Revised Policy amends the term ‘commodity exchanges’ to ‘commodity derivative exchanges’, under the concerned sector/ activity list.
The Revised Policy, however, does not change the foreign direct investment limit permitted in the sector which continues to be 49% (forty nine per cent) under the automatic route.
The full text of the Revised Policy may be accessed at the following link:
http://dipp.nic.in/English/acts_rules/Press_Notes/pn1_2017.pdf