Regulatory Changes Introduced For Reclassification Of FPI Into FDI

In a bid to further simplify the compliance requirements for reclassification of foreign portfolio investments ("FPI") into foreign direct investment ("FDI"), the Reserve Bank of India ("RBI") has recently notified a press release¹ ("Press Release") clarifying the operational framework in this regard ("Operational Framework").

As per the Foreign Exchange Management (Non-debt Instruments) Rules 2019, ("NDI Rules"), investments under the FPI route must be less than 10% of the total paid-up equity capital of an Indian company, on a fully diluted basis, or less than 10% of the paid-up value of each series of debentures or preference shares or share warrants issued by an Indian company², with the total holdings of all FPI investors investing in an Indian company, including all direct and indirect investments, not exceeding 24% of the paid-up equity capital of the Indian company, on an aggregate level³.