RBI allows foreign individuals to directly invest in equities

On 1st January the government had announced that soon QFIs will be allowed to directly invest in the Indian equity market to widen the non-resident investor base in stock markets as well as to expand the set of non-resident portfolio investors

Mumbai: The Reserve Bank of India (RBI) on Friday allowed foreign individual investors, pension funds and trusts as qualified foreign investors (QFIs) to directly invest in equities of up to 5% of the paid up capital of the listed company, reports PTI.

On 1st January the government had announced that soon QFIs will be allowed to directly invest in the Indian equity market to widen the non-resident investor base in stock markets as well as to expand the set of non-resident portfolio investors.

A QFI is an individual, group or association resident in a foreign country that is compliant with Financial Action Task Force (FATF) standards. QFIs do not include FIIs/sub accounts.

“QFIs shall be permitted to invest through the Securities and Exchange Board of India (SEBI) registered Depository Participants (DPs) only in equity shares of listed Indian companies... as well as in equity shares of Indian companies which are offered to public...” the RBI said in guidelines enabling QFIs investments in Indian companies.

They would also be permitted to acquire equity shares by way of rights shares, bonus shares or equity shares.

The RBI said the DP will purchase equity at the instruction of the respective QFIs within five working days failing which the funds would be immediately repatriated back to the QFI’s designated overseas bank account.

However, “only QFIs from jurisdictions which are FATF compliant and with which SEBI has signed MoUs under the IOSCO framework will be eligible to invest in equity shares under this scheme,” the RBI added.

Besides, the DPs will ensure KYC (know-your-customer) norms of such investors.

The move comes against the backdrop of significant foreign capital outflows from the domestic equity market in recent times, which has resulted in rupee volatility.

As per the guidelines, the individual and aggregate investment limits for QFIs would be 5% and 10% respectively of the paid up capital of an Indian company.

These limits would be over and above the FII and NRI investment ceilings prescribed under the Portfolio Investment Scheme for foreign investment in India, RBI added.

Further, the central bank modified the time period for which funds can be kept in the single rupee pool bank account of the DP under the scheme for investment by QFIs in units of domestic mutual funds to five working days.

In August last year, the government allowed foreign investors to directly invest up to $13 billion in equity and debt schemes of mutual funds.

Amid severe volatility in the capital market last year, FIIs outflows amounted to over Rs2,700 crore. The situation had an impact on the rupee, which fell to an all-time low of to Rs54.30 on 15th December.

The fluctuation in the domestic currency has put pressure on policymakers.

 

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RBI notifies change in single-brand retail FDI policy

 

Removal of the investment cap is likely to help global fashion brands, especially from Italy and France, to strengthen their interest in the growing Indian market

Mumbai: The Reserve Bank of India (RBI) on Friday operationalised the change in foreign direct investment (FDI) policy by removing restrictions on foreign investment limit in single-brand retail.

“...it has now been decided that FDI up to 100% would be permitted in single brand product trading under the government route...” the RBI said in a circular.

The Department of Industrial Policy and Promotion (DIPP) had earlier increased the FDI limit in single-brand retail from 51% to 100%.

“Necessary amendments to Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000...are being notified separately,” RBI added.

Removal of the investment cap is likely to help global fashion brands, especially from Italy and France, to strengthen their interest in the growing Indian market.

The government had said the move was aimed at enhancing competitiveness of Indian enterprises through access to global design, technologies and management practices.

Though 51% FDI in single brand was allowed in February 2006, not much investment has come in the sector.

During last three-and-a-half years, FDI worth only Rs196 crore was received in the sector.

 

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Economy likely to grow between 7-7.5% in FY11-12: Chief economic advisor

 

“What looked like a 9% growth year, now we are projecting somewhere between 7% and 7.5%,” chief economic adviser Kaushik Basu said while addressing an event of Global Development Network

New Delhi: Attributing slowdown to global factors, chief economic adviser Kaushik Basu on Friday said economic growth in the current fiscal could be around 7%-7.5%, down from 8.5% a year ago, reports PTI.

“What looked like a 9% growth year, now we are projecting somewhere between 7% and 7.5%,” Mr Basu said while addressing an event of Global Development Network.

Indian economy registered a growth of 7.3% in the first half of the current fiscal.

The economy grew by 8.5% in 2010-11.

As per the Reserve Bank of India’s (RBI) projection, the growth rate in the current fiscal would slow down to 7.6% from earlier projection of 8%.

“When we began our Budget exercise in January 2010, we thought we will grow by 9% (2011-12). But oil prices went up from $90 to $110 and not really coming down the way we were expecting,” he said.

“A bit of this to my mind is to do with major change in global scenario...what is happening in the world you get one crisis after another. 2008 and now we are standing on the brink of another one 2012,” he said.

“Europe began to be tottering on the brink of crisis.

Over the last two months our exports have begun doing badly and over the year we are seeing directly it is the international demand which is tanking and beginning to affect us,” he said.

With Germany’s growth figure being downgraded, he said, “We are really worried about Europe. Whether Europe is going to go into negative growth”.

Two quarters of negative growth will be officially described as recession, he added.

 

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