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RBI simplifies transactions among FIIs

The Reserve Bank of India has announced that transactions among foreign institutional investors will no longer require its post-facto confirmation. Earlier, FIIs could freely buy or sell Indian stocks among themselves, but needed confirmation later from the Reserve Bank. The apex bank has now done away with post-facto confirmation for such transactions, which can now be now reported by the designated banks to the RBI in the normal course.

Further, in order to allow more flexibility, it has been decided to raise the trigger point limit for investments in Indian companies by FIIs, non-resident Indians and overseas corporate bodies under the portfolio scheme by two percentage points.

Accordingly, the RBI will now alert designated banks at 22 and 28 per cent in the case of Indian companies in which investments by FIIs/NRIs/OCBs under the portfolio scheme are allowed up to 24 per cent and 30 per cent, respectively. Similarly, the trigger point limit for banks has been raised from the earlier 16 per cent to 18 per cent.

The RBI monitors foreign investments in Indian companies by FIIs/NRIs/OCBs under the portfolio investment scheme on a daily basis. For effectively monitoring such foreign investment ceiling limits, the RBI alerts all designated banks at a cut-off point limit lower than the ceiling limit, after which the foreign investments are allowed only with the prior approval of the Reserve Bank.