Foreign Direct Investment Regulations: Foreign Direct Investment (FDI) Policy. SEBI (Foreign Portfolio Investors) Regulations -2014, SEBI (Alternate Investment Fund) Regulations – 2012.

1. FOREIGN DIRECT INVESTMENT (FDI) &
FOREIGN PORTFOLIO INVESTMENT (FPI)

2. Foreign Portfolio Investment - FPI
1. Securities and other financial assets passively held by foreign investors
2. No ownership of financial assets
3. Liquid

3. UNCTAD:
FDI is defined as “an investment involving a long-term
relationship and reflecting a lasting interest in and control by a
resident entity in one economy (foreign direct investor or parent
enterprise) of an enterprise resident in a different economy (FDI
enterprise or affiliate enterprise or foreign affiliate). Such
investment involves both the initial transaction between two
entities and all subsequent transactions between them and
among foreign affiliates. A direct investment enterprise is defined
as an incorporated or unincorporated enterprise in which the
direct investor, resident in another economy, owns 10 percent or
more of the ordinary shares or voting power.”

9. Contents
Chapter 1: Intent and Objective
Chapter 2: Definitions
Chapter 3: General Conditions on FDI
Chapter 4: Procedure for Government Approval
Chapter 5: Sector Specific Conditions on FDI
Annexures

10. Chapter 1 Intent and Objective
To attract and promote foreign direct investment in order to
supplement domestic capital, technology and skills, for
accelerated economic growth.
Foreign Direct Investment, as distinguished from portfolio
investment, has the connotation of establishing a ‘lasting
interest’ in an enterprise that is resident in an economy
other than that of the investor.

11. The Department of Industrial Policy and Promotion (DIPP), Ministry of
Commerce & Industry, Government of India makes policy
pronouncements on FDI through Press Notes/Press Releases which are
notified by the Reserve Bank of India as amendments to the Foreign
Exchange Management (Transfer or Issue of Security by Persons
Resident Outside India) Regulations, 2000 (notification No. FEMA
20/2000-RB dated May 3, 2000).

12. Chapter 2: Definitions
‘FDI’ means investment by non-resident entity/person
resident outside India in the capital of an Indian company
under Schedule 1 of Foreign Exchange Management
(Transfer or Issue of Security by a Person Resident Outside
India) Regulations,2000
(Original notification is available at
https://rbi.org.in/Scripts/BS_FemaNotifications.aspx?Id=1
74. Subsequent amendment notifications are available at
https://rbi.org.in/Scripts/BS_FemaNotifications.aspx).

13. Foreign Institutional Investor’(FII) means an entity established or incorporated
outside India which proposes to make investment in India and which is
registered as a FII in accordance with the Securities and Exchange Board of India
(SEBI) (Foreign Institutional Investor) Regulations 1995.
Foreign Portfolio Investor’(FPI)1 means a person registered in accordance with
the provisions of Securities and Exchange Board of India (SEBI) (Foreign Portfolio
Investors) Regulations, 2014, as amended from time to time.
Foreign Venture Capital Investor’ (FVCI) means an investor incorporated and
established outside India, which is registered under the Securities and Exchange
Board of India (Foreign Venture Capital Investor) Regulations, 2000 {SEBI(FVCI)
Regulations} and proposes to make investment in accordance with these
Regulations.
Government route’ means that investment in the capital of resident entities by
non-resident entities can be made only with the prior approval of Government
(Competent Ministry/Department for grant of approval).

14. Chapter 3: General Conditions on FDI
A non-resident entity can invest in India, subject to the FDI Policy
except in those sectors/activities which are prohibited. However, a
citizen of Bangladesh or an entity incorporated in Bangladesh can
invest only under the Government route. Further, a citizen of
Pakistan or an entity incorporated in Pakistan can invest, only under
the Government route, in sectors/activities other than defence,
space, atomic energy and sectors/activities prohibited for foreign
investment.

15. Caps on Investments
Investments can be made by non-residents in
the capital of a resident entity only to the extent
of the percentage of the total capital as
specified in the FDI policy. The caps in various
sector(s) are detailed in Chapter 5 of this
Circular.

16. Chapter 4: Procedure for Government Approval
Activity/ sector Administrative Ministry/ Department
Mining Ministry of Mines
Defence Department of Defence Production, Ministry of
Defence
Broadcasting/ Print Media Ministry of Information & Broadcasting
Civil Aviation Ministry of Civil Aviation
Satellites Department of Space
Telecommunication Department of Telecommunications
FDI proposals Department of Industrial Policy & Promotion
Financial Sector Department of Economic Affairs
Banking (Public and Private) Department of Financial Services
Pharmaceuticals Department of Pharmaceuticals

17. Chapter 5: Sector Specific Conditions on FDI
FDI is prohibited in:
a) Lottery Business including Government/private lottery, online lotteries, etc.
b) Gambling and Betting including casinos etc.
c) Chit funds
d) Nidhi company
e) Trading in Transferable Development Rights (TDRs)
f) Real Estate Business or Construction of Farm Houses
‘Real estate business’ shall not include development of townships, construction of residential /commercial premises,
roads or bridges and Real Estate Investment Trusts (REITs) registered and regulated under the SEBI (REITs) Regulations
2014.
g) Manufacturing of cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes
h) Activities/sectors not open to private sector investment e.g.(I) Atomic Energy and (II) Railway operations(other than
permitted activities mentioned in para 5.2).

18. Sector/Activity % of Equity/ FDI Cap Entry Route
Agriculture 100% Automatic
Mining 100% Automatic
Defence 100% Automatic up to 49%
Broadcasting 100% Automatic
Airports 100% Automatic
Construction-development 100% Automatic
Telecom Services 100% Automatic up to 49% Government route beyond 49%
Multi Brand Retail Trading 51% Government
Single Brand product retail trading 100% Automatic up to 49% Government route beyond 49%
Banking- Private Sector 74% Automatic up to 49% , Government route beyond 49%
and up to 74%.
Banking Public Sector 20% Government
Insurance 49% Automatic

19. SECURITIES AND EXCHANGE BOARD OF INDIA
(FOREIGN PORTFOLIO INVESTORS) REGULATIONS, 2014
It’s a framework for registration and procedures
with regard to foreign investors who propose to
make portfolio investment in India.

21. CHAPTER I PRELIMINARY
CHAPTER II REGISTRATION OF FOREIGN PORTFOLIO INVESTORS
CHAPTER III APPROVAL OF DESIGNATED DEPOSITORY PARTICIPANT
CHAPTER IV INVESTMENT CONDITIONS AND RESTRICTIONS
CHAPTER V GENERAL OBLIGATIONS AND RESPONSIBILITIES OF
FOREIGN PORTFOLIO INVESTORS
CHAPTER VI GENERAL OBLIGATIONS AND RESPONSIBILITIES OF
DESIGNATED DEPOSITORY PARTICIPANTS
CHAPTER VII INSPECTION
CHAPTER VIII PROCEDURE FOR ACTION IN CASE OF DEFAULT
CHAPTER IX MISCELLANEOUS
FORMS AND SCHEDULES

22. CHAPTER I PRELIMINARY-
Short title and commencement & Definitions
of terms
1. certificate" means a certificate of registration granted to a foreign portfolio
investor by the designated depository participant on behalf of the Board
under these regulations;
2. “designated depository participant” means a person who has been approved
by the Board under Chapter III of these regulations;
3. “foreign portfolio investor” means a person who satisfies the eligibility
criteria prescribed under regulation 4 and has been registered under Chapter
II of these regulations, which shall be deemed to be an intermediary in terms
of the provisions of the Act:

23. CHAPTER II
REGISTRATION OF FOREIGN PORTFOLIO INVESTORS
1. Application for grant of certificate as foreign portfolio investor
2. Eligibility criteria of foreign portfolio investor
3. Categories of foreign portfolio investor
4. Furnishing of information, clarification and personal representation
5. Procedure and grant of certificate
6. Application to conform to the requirements
7. Procedure where certificate is not granted
8. Suspension, cancellation or surrender of certificate

24. CHAPTER III
APPROVAL OF DESIGNATED DEPOSITORY PARTICIPANT
1. Application for approval to act as designated depository participant
2. Eligibility criteria of designated depository participant
3. Furnishing of information, clarification and personal representation
4. Application to conform to the requirements
5. Procedure where approval is not granted
6. Validity of approval
7. Suspension or withdrawal of approval
8. Surrender of approval

25. CHAPTER IV
INVESTMENT CONDITIONS AND RESTRICTIONS
1. Commencement of investment
2. Investment restrictions

26. CHAPTER V
GENERAL OBLIGATIONS AND RESPONSIBILITIES OF
FOREIGN PORTFOLIO INVESTORS
1. Code of conduct
2. Engagement of designated depository participant
3. Appointment of custodian of securities
4. Appointment of designated bank
5. Appointment of compliance officer
6. Investment advice in publicly accessible media
7. Maintenance of proper books of accounts, records and documents
8. Preservation of books of accounts, records and documents

27. CHAPTER VI
GENERAL OBLIGATIONS AND RESPONSIBILITIES
OF DESIGNATED DEPOSITORY PARTICIPANTS
1. Maintenance of proper books of accounts, records and documents
2. Appointment of compliance officer
3. Information to the Board/Reserve Bank of India
4. Investment advice in publicly accessible media

28. CHAPTER VII
INSPECTION
1. Board's right to inspect
2. Obligations of designated depository participants in connection with inspection by the
Board

29. CHAPTER VIII
PROCEDURE FOR ACTION IN CASE OF DEFAULT
Liability for action in case of default

30. CHAPTER IX
MISCELLANEOUS
1. Power of the Board to issue clarifications
2. Amendments to other regulations
3. Repeal, rescission and saving

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