Government liberalises norms for FII investment in commodity bourses

Investments by foreign financial institutions (FIIs) within the prescribed limits of foreign direct investment (FDI) no longer require prior permission of the government under the revised policy. The government has now decided to liberalise the policy on FIIs and to mandate the requirement of government approval only for the FDI component of the investment.

This is in tune with the policy for foreign investment in other infrastructure companies in the securities market such as stock exchanges, depositories and clearing corporations, the commerce ministry said in a circular issued today.

The prescribed overall limit for foreign investment in commodity exchanges, including investment by FIIs under the government approval route, ie, through the Foreign Investment Promotion Board (FIPB), in commodity exchanges is 49 per cent. Within this overall cap of 49 per cent, investment by registered FIIs, under the portfolio investment scheme (PIS) is limited to 23 per cent and investment under the FDI scheme is limited to 26 per cent.

FDI limited to lease finance: The revised guidelines on FDI has also clarified that FDI in 'leasing and finance', which is one among the 18 activities of non-banking finance companies (NBFCs), will be permitted only in 'financial leases' and not 'operating leases'.

This provision intends to clarify the coverage of the term 'leasing and finance', insofar as the NBFC sector is concerned, the release said.

Conversion of capital goods to equity: For conversion of imported capital goods, including second-hand machinery, to equity, it has now been mandated that such machinery and equipment should embody state-of-the-art technology, compliant with international standards, in terms of being green, clean and energy efficient.