The Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 states that total holding by each FII/SEBI approved sub-account of FII shall not exceed:
- 10%of the total paid-upequity capital or
- 10%of the paid-up value of each series of convertible debentures issued by an Indian company
Total holdings of all FIIs/sub-accounts of FIIs put together shall not exceed:
- 24% of paid-upequity capital or
- 24% paid up value ofeach series of convertible debentures
Indian Companies can however increase the aforesaid limit of 24% to applicable sectoral cap/statutory ceiling by passing a resolution by its Board of Directors followed by passing of a special resolution to that effect by its General Body. Subsequently, the passed resolution should be submitted to RBI to enable RBI to issue press release / notification to increase the investment limit by Foreign Investors.
RAI submitted a representation to the Ministry of Finance stating that sectoral cap is under automatic route or under approval route should not affect the RBI decision in any manner.
Presently, the view taken at apex bank is that in case of approval route, even for increasing the Portfolio Investment limit, FIPB approval is necessary and hence they do not take any action on application made by companies for increase of Portfolio Investment Limit by companies, where the sectoral cap is under approval route.
In this regard, RAI recommended to allow single investor cap of 10%subject to a maximum of 49%. This will allow Indian promoted retail concept access to much needed long-term capital.
RAI delegates met Dr. P K Mishra, Dr. C S Mohapatra, Mr. P K Bagga and Mr. Manu Vettickan from the Department of Economic Affairs, Ministry of Finance to seek enhancement of FII limit in retail. The officials of the Department of Economic Affairs appreciated our concern and assured that they will take up the matter with the Department of Industrial Policy and Promotion and take positive action in order to benefit the retail industry.