Thursday, January 18, 2007

Government may remove distinctions between FDI and FII

The government is contemplating the removal of the distinction between FDI and FII investments. The new policy will require changes in the Foreign Exchange Management Act (FEMA) regulations, and will look at foreign investments in a company as a whole, instead of treating foreign institutional investors (FIIs) as a separate entity.

The proposed policy change will impact several sectors, notably, the asset reconstruction companies, direct-to-home distribution of broadcast signals and real estate, where separate sub-ceilings or conditions apply at present for foreign direct investment (FDI), leaving FII investments outside their scope.

Senior finance ministry officials are set to hold a meeting later this week with the Reserve Bank of India (RBI) and the Department of Industrial Policy and Promotion (DIPP) to take a final view on this matter. The debate over removing distinctions between FII investments and FDI came up following the DIPP proposal over foreign investments in the real estate sector.

Read more in The Economic Times.

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