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RBI Proposal to Double Foreign Investor Limits in Listed Firms

28 March 20251 min read
BANKING & FINANCERBI Proposal toDouble ForeignInvestor Limits inListed Firms28 March 2025safalsetu.com

Why in the news

RBI plans to loosen foreign holding limits in listed Indian companies to draw capital after heavy FPI outflows.

Proposed limits

LimitNowProposed
Single foreign investor5%10%
Combined, overseas individual investors10%24%
  • $28 billion of FPI outflows have occurred since September.
  • Until now, only NRIs and OCIs could hold up to 5% under FEMA Schedule III; the benefit would extend to all foreign investors, widening the investor pool.

SEBI’s concerns

  • Hard-to-monitor holdings and risk of breaching takeover norms.
  • Holdings of a single investor with associates could trigger mandatory open offers.
  • Without robust tracking, such takeovers could go unnoticed.

Next steps

  • Government, RBI and SEBI are in the final stage of talks.
  • Government and RBI favour the move; SEBI wants stronger compliance.

Significance

Higher limits could add liquidity and lift sentiment, but strict monitoring is needed to avoid unintended takeovers.

Exam angle

  • Act: FEMA; earlier 5% limit for NRIs and OCIs.

Test yourself

1. RBI plans to raise the cap on an individual foreign investor in a listed Indian company from 5% to what level?

The individual cap is proposed to double from 5% to 10%.

2. Until now, which investors could hold up to 5% in an Indian company under FEMA Schedule III?

Only NRIs and OCIs had the 5% allowance before the proposed extension.

3. Which regulator raised concerns about monitoring and takeover norms over RBI's foreign holding proposal?

SEBI flagged monitoring challenges and the risk of breaching takeover norms.

This topic is part of Daily Current Affairs 28 March 2025 (23 topics).

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