Mayaram panel weighing segregation of FDI and portfolio investments

A high-level panel headed by economic affairs secretary Arvind Mayaram is in the process of overhauling the foreign investment regime in the country by splitting overseas investment flows into two categories - foreign portfolio investment (FPI) and foreign direct investment (FDI) - with a minimum composite cap of 49 per cent.

The changes in the definition of FDI and FII are aimed at removing the ambiguity on the two types of foreign investments.

The proposal being considered by the Arvind Mayaram panel envisages an aggregate automatic limit of 24 per cent of FPI, which may be raised up to the extent of FDI permitted under the automatic route.

The individual investment limit under the FPI, including those by qualified foreign investors (QFIs) and foreign institutional investors (FIIs), has been proposed up to 10 per cent of the paid-up capital in a listed company.

Any individual investment above 10 per cent will be treated as FDI.

In case of an unlisted company the FPI investment would be deemed as FDI. The panel has suggested separate guidelines for investment by non-resident Indians.

An investor will have the option to invest as either FPI or FDI, but not both.

The recommendations will be applicable with prospective effect and hence will not impact the existing investments, sources said.

"We should remember that there is already a circular by the RBI and a DIPP Press Note which grandfathers everything which happens earlier. So we don't upset everything that has happened. Because ultimately policies keep changing. You cannot change history, so anything else which doesn't fall within this will be grandfathered," Mayaram had said earlier this week.

Finance minister P Chidambaram had, in his budget speech, proposed to follow the international practice in the definition of  foreign investments.