Portfolio Investment Policy/ FII Policy

Portfolio Investment Scheme
FII is an institution that allows the investors ton invest in Indian securities traded in both primary and secondary capital markets secondary market. The comprehensive list of FII includes , Incorporated/Institutional Portfolio managers or their power attorney holders, University Funds,



Asset Management Companies, Pension Funds, Investment Trust as nominee companies, Endowment Foundations, Charitable Trusts Charitable Societies and Mutual Funds.

Foreign Institutional Investors (FIIs) can invest in India in the securities traded in both primary and secondary capital markets. The securities consist of shares, debentures, warrants, and units of mutual funds, government securities and derivative instruments.



Regulation of Portfolio Investment / FIIs
There are two main bodies regulating portfolio investment in India- SEBI (Securities and Exchange Board of India) and RBI (Reserve Bank of India). Every FII is required to register himself with Securities and Exchange Board of India (SEBI) and shall comply with the Exchange Control Regulations of RBI. SEBI (FII) Regulations, 1995 and Regulation 5(2) of FEMA regulates the FIIs. Under the regulation of FEMA, RBI approval is also required in order to purchase or sell securities on Stock Exchanges and open foreign currency and Indian Rupee accounts with a designated bank branch. The permission from RBI is not requited so long as the FIIs purchase and sell on recognized stock exchange. All non-stock exchange sales/purchases require RBI permission.



Policy on FII Investment/ Portfolio Investment
The policy regulating FII, (Foreign Institutional Investors) NRI,( Non-Resident Indians) and PIO (Persons of Indian Origin) investment are as follows:

• (FIIs), (NRIs), and (PIOs) can invest in Indian capital market- both primary and secondary capital markets through the portfolio investment scheme (PIS). Through this scheme, foreign institution investors and Non resident Indians (NRIs) can acquire shares/debentures of Indian companies through the stock exchanges in India.
• FIIs can invest only up to 24 per cent of the paid up capital of the Indian company whereas for NRIs and PIOs this ceiling is kept up to 10 per cent. However for investment in public sector banks, including the State Bank of India the limit is 20 per cent of the paid up capital.
• The ceiling of 24 per cent for FII investment can be raised up to sectoral cap/statutory ceiling, if it is approved by the board and the general body of the company through a special resolution. Similarly the ceiling limit for NRIs and PIOs can be raised to 24% from 10% if it is approved by the general body of the company passing a resolution to that effect.
• The ceiling for FIIs is independent of the ceiling of 10/24 per cent for NRIs/PIOs.
  

The equity shares and convertible debentures of the companies within the prescribed ceilings are available for purchase under PIS subject to:

1. the total purchase of equity and debentures by all NRIs/PIOs both, on repatriation and non-repatriation basis, should be within an overall ceiling limit of (a) 24 per cent of the company's total paid up equity capital and (b) 24 per cent of the total paid up value of each series of convertible debenture; and




2. the investment made on repatriation basis by any single NRI/PIO in the equity shares and convertible debentures not exceeding five per cent of the paid up equity capital of the company or five per cent of the total paid up value of each series of convertible debentures issued by the company.

• The FIIs can divide their investment between equity and debt instruments in the ratio of 70:30.
• FII can also pronounced itself as a cent percent(100 percent) debt FII in which case it can make its entire investment in debt instruments.
• The FIIs are allowed to both purchase and sell securities on stock exchanges. These FIIs canalso invest in listed and unlisted securities outside Stock Exchanges where the price has been approved by RBI.
• Individual FII or Sub account is not allowed to purchase more than 10% of the paid up capital of an Indian company.
• Acquiring more than 24% of the paid up capital of an Indian Company, by all FIIs and their sub-accounts taken together is prohibited.