FDI, FII ambiguity: RBI discussion paper soon

Matter was discussed during meeting of an eight- member committee headed by DEA

The Reserve Bank of India will come out with a discussion paper within 15 days on redefining foreign direct investment (FDI) and foreign institutional investment (FII) so as to remove ambiguities.

“The paper will include questions like legal and taxation issues involved in the implementation of the new definition. How the different instruments of foreign investments would be treated? How it would impact investments in listed and unlisted firms,” an official told PTI.

The matter was discussed during the meeting of an eight-member committee headed by Department of Economic Affairs (DEA) Secretary Arvind Mayaram here today. The committee has been appointed for giving clear definitions to FDI and FII. The official said the committee would meet again after getting the views of all the stakeholders. “RBI will circulate the paper within the next 15-20 days,” he said.

Other committee members include DIPP secretary, chief economic advisor in DEA, RBI Deputy Governor H R Khan and Sebi Member S Raman.

Mayaram had earlier said there was a lot of confusion in the minds of foreign investors because of distinction between FDI and FII.

Finance Minister P Chidambaram, in his Budget speech, had proposed to follow the international practice with regard to defining FDI and FII. According to the proposed definition, if an investor has a stake of 10 per cent or less in a company, the investment would be treated as FII. And if an investor has a stake of more than 10 per cent, it would be treated as FDI.