Foreign investments (FDI) allowed in stock exchanges, depositories and clearing corporations

In their respective circulars on 22nd December 2006, Reserve Bank of India (RBI) and Securities and Exchange Board of India (SEBI), have advised that Government of India has allowed foreign investment in Infrastructure Companies in Securities Markets, namely stock exchanges, depositories and clearing corporations, subject to the following conditions :

a) Foreign investment upto 49% will be allowed in these companies with a separate Foreign Direct Investment (FDI) cap of 26% and Foreign Institutional Investment (FII) cap of 23%;

b) FDI will be allowed with specific prior approval of FIPB;

c) FII will be allowed only through purchases in the secondary market;

d) FII shall not seek and will not get representation on the Board of Directors;

e) No foreign investor, including persons acting in concert, will hold more than 5% of the equity in these companies.

The aforesaid limits for foreign investment in respect of recognised stock exchanges shall be subject to the limit of 5% shareholding by any person, directly or indirectly, as prescribed under the Securities Contracts (Regulation) (Manner of Increasing and Maintaining Public Shareholding in Recognised Stock Exchanges) Regulations, 2006.

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