The Reserve Bank of India has issued an operational framework to allow foreign portfolio investors (FPIs) to convert their investments to foreign direct investment (FDI) if the entity breaches the prescribed 10% limit.

As per current regulations, FPIs can hold a maximum of 10% of an Indian company’s total paid-up equity capital. 

Any FPI exceeding this cap has the option of divesting their holdings or reclassifying such holdings as FDI. This is subject to the conditions specified by the RBI and Sebi within five trading days from the date of settlement of the trades causing the breach.

The RBI has issued an operational framework for reclassification of foreign portfolio investment by FPI to FDI.

As per the framework, the FPI concerned will have to take necessary approvals from the government and concurrence of the Indian investee company concerned.

Reclassification, however, shall not be permitted in any sector where FDI is restricted, the RBI said.