General Foreign Institutional Investors (FIIs )

Including pension funds, mutual funds, investment trusts, university funds, endowments, foundations or charitable trusts or charitable societies, etc. are permitted to invest in all securities i.e. equity shares/debentures/ PCDs/ FCDs/ Rights renunciations /warrants of Indian companies listed as well as unlisted, dated Government securities, Treasury Bills and units of domestic mutual fund schemes in the primary and secondary markets. Investments by Flls will be subject to a ceiling 24%or the total paid up equity capital of the company. The ceiling would apply to all holdings taken together along with conversion out of the fully and partially convertible debentures issued by the Company. The holding of a single FII or the concerned FII group in any company would also be subject to a ceiling of 10% of total paid up equity capital. Indian companies, however, would be permitted to raise the ceiling limit of 24% to 30% provided it has been approved by the Board of Directors of the company and a Special Resolution is passed to that effect by the General Body. The ceiling of 24% or 30% as the case may be, applicable for investment by FLLS will not include investment made by NRIs/ OCBs under the Portfolio. Investment Scheme. It will also not include direct foreign investment by a foreign collaborator and investment by FIIS through Off-shore Funds, Global Depository Receipts and Euro-Convertible Bonds.

The Reserve Bank has also granted general permission to mutual funds in India to issue units or similar instruments to FIIs under the scheme approved by Securities and Exchange Board of India and to send such units/instruments out of India to their global custodians, as also to repurchase units/instruments from FIIs .

FIIs are required to register themselves with Securities and Exchange Board of India (SEBI) before they invest in the Indian capital. Application for registration should be made by FIIs to SEBI in the prescribed form in duplicate. One copy of the application will be forwarded by SEBI to Reserve Bank. Reserve Bank will grant permission under FERA 1973 to the bank branch designated by the applicant FII to buy/sell equity shares/debentures/warrants dated Government Securities/Treasury Bills/ units of domestic mutual funds. Reserve Bank’s permission will be initially valid for five years and will be operative only after obtaining registration form SEBI. This permission can be renewed for a further period of five years on request. Reserve Bank’s permission would enable the FIIs to buy/sell the securities and remit the income/dividend/sale proceeds after payment of applicable taxes through the designated bank branch. Reserve Bank’s permission will also cover investment in shares/debentures of Indian companies in primary market i.e. new issues provided the company has reserved certain quota out of its public issue in favour of FIIs. The designated bank branch is required to submit to Reserve Bank a statement in Form LEC on daily basis in respect of purchase/sales or shares/ debentures made for the purpose of monitoring by Reserve Bank the overall ceiling of 24% or 30%, as the case may be.

In order to facilitate making of investments in India and repatriation on income/sale proceeds of such investments, Reserve Bank will permit the designated Bank to open a foreign currency denominated account and a special Non-resident rupee account in the name of FII. The designated bank branch will also be permitted (a) to transfer funds from foreign currency account to rupee account and vice versa (b) to make it investments out of the balance in the rupee account, (c) to credit sale proceeds of shares and other investments as also dividend/interest earned on the investments to the rupee account and (d) to transfer the repatriable proceeds (net of taxes) from the rupee account to the foreign currency account.