New Guidelines for Reclassifying Foreign Portfolio Investments to Direct Investments Exceeding 10% Equity Limit.

The circular provides an operational framework for reclassification of Foreign Portfolio Investment (FPI) to Foreign Direct Investment (FDI) as per the Foreign Exchange Management (Non-debt Instruments) Rules, 2019. It allows FPIs investing beyond the prescribed 10% limit of paid-up equity capital to reclassify such holdings as FDI, subject to conditions. The key points are: reclassification not permitted in FDI-prohibited sectors; necessary approvals from government and investee company's concurrence required; reporting requirements specified; custodian to transfer shares from FPI to FDI demat account post reporting; entire FPI investment treated as FDI post reclassification; reclassification/divestment timeline prescribed; post reclassification, investment governed by FDI rules. .....

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