The Commerce and Industry Ministry has said that given that banking and defence are sensitive sectors, current FDI caps of 49% and 24% will be retained. However, FDI can go up to 100% on case to case basis.
Foreign Institutional Investors (FIIs) cannot exceed the cap prescribed for portfolio investments in private sector banks and defence even after introduction of composite cap concept, said an official.
The Commerce and Industry Ministry has clarified that bank being a "sensitive sector", portfolio investments (FIIS, FPIs, QFIs), which are in the nature of hot money, cannot go beyond the current limit of 49%, a ministry official said.
Similarly, the official said, defence is also a sensitive sector and hence portfolio investments will be limited to the current 24% cap, although the FDI can go up to 100% on case to case basis.
Promising a simpler foreign investment regime, the government yesterday introduced a concept of composite cap for all kinds of overseas inflows including through FDI, FII and NRI routes -- a move that would benefit retail companies and stock exchanges among others.
The clarification by the Commerce Ministry came after a section of banks yesterday said that portfolio investors could raise their stakes up to the sectoral limit of 74%.
The official also said investments by NRIs and through Depository Receipts (DRs) can go beyond the 49% limit with the government approval route. This provision was already there in the FDI policy.
Portfolio investments in four sectors - commodity exchanges, credit information companies, infrastructure companies in securities market and power exchanges - can go upto their respective sectoral caps, the official said adding these are not sensitive sectors.
"The ministry has relaxed the norms for these four sectors because they are not sensitive and by giving this relaxation, they would attract foreign investments," the official added.
For example, in Credit Information Companies, portfolio investment is permitted up to 24% but now they can go upto 74%, which is the sectoral cap.
The official clarified that in all sectors, with the exception of the portfolio investments will be limited as per the existing FDI policy.
The government''s decision was aimed at simplification of FDI policy with a view to attracting foreign investments and also improving ease of doing business in India.
Under the existing policy, there are different caps for separate investment categories like FDI, FII and NRIs.
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
)
)
)
)
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}