Mumbai: The Reserve Bank of India (RBI) has finally done
it. It has allowed FIIs a higher investment limit, which can go up
to the sectoral FDI limit in comparison to the 49 per cent set up
With this, FIIs can invest up to even 100 per cent in the
equity of a company, provided the government has already allowed
100 per cent investment in that sector in which the company
Before this amendment came in, when foreign companies could
invest up to 100 per cent in the sector in terms of FDI, their
investment in individual companies was restricted to 49 per cent.
In a release, the RBI said: It has been decided in
consultation with the government that FII investments in Indian
companies can now be increased beyond 24 per cent to the sectoral
cap/statutory ceiling, as applicable, provided this has the
approval of the Indian companys board as also its general body.
The move is obviously directed at popping up stock market
sentiment, which has taken a beating following the terrorist
attacks on America. However, as pointed out by domain-B in
earlier stories, it remains to be seen how many companies will
pass enabling resolutions to actually see such a hike happening.
There are very few companies where FII investment limit has
been raised even to 49 per cent from 24 per cent. At present, the
list includes names of ICICI, ICICI Bank, Reliance Industries,
Reliance Petroleum, Satyam Computer Services, Infosys
Technologies, NIIT, Crisil, HDFC, Global Telesystems and Hughes
Analysts feel it would take some time before investment, if at
all, actually takes place, because companies would require some
more time to get through enabling resolutions. They also feel that
the government could have done away with enabling resolutions by
the companies and allowed the FIIs to invest directly instead.