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Foreign investment limit increased to 40 per cent

The Bharatiya Janata Party-led coalition at the Centre has increased the foreign investment limit in Indian companies to 40 per cent. The earlier ceiling was 30 per cent of the paid-up capital of a company.

The relaxation is intended to give a major boost to non-resident Indian investment -- the government is banking heavily on the NRIs in view of the sanctions imposed by the US and other countries -- by delinking the purchase of shares by NRIs, overseas corporate bodies and foreign institutional investors from the existing 24 per cent ceiling.

According to a statement issued by the finance ministry, the decision gives greater flexibility to NRI/ OCB/ persons of Indian origin portfolio investments.

While the NRI/OCB/PIO limit would be 10 per cent of the paid-up capital, the FII investment ceiling will range between 24 to 30 per cent. Any decision in this regard, however, has to be ratified by the company's board of directors. Thus, the total foreign investment has been increased to 40 per cent.

Sources said the decision was taken as several companies were not in a position to absorb additional NRI investments though the Union Budget had doubled the aggregate ceiling for NRI investment. For, the companies had already reached the earlier foreign investment ceiling of 24 per cent (30 per cent with the approval of the company's board).