Commodity Exchanges asked to reduce foreign equity by 31st March 2010

September 30, 2009: Government of India had laid the guidelines for foreign investment in Commodity Exchanges vide Press Note 2(2008) dated 12th March 2008. As per the guidelines, a composite ceiling for foreign investment of 49% was allowed with prior Government approval, subject to the condition that investment under the Portfolio Investment Scheme will be limited to 23% and that under the FDI Scheme will be limited to 26%. Further, no foreign investor/entity including persons acting in concert will hold more than 5% of the equity in these companies.

Commodity Exchanges were permitted to avail of transition/complying/correction time for this purpose, up to 30.06.2009, vide Press Note 8 of 2008 dated 19 August, 2008. This time limit was further extended up to 30.09.2009, vide Press Note 5(2009) dated 14 May, 2009.

It has now decided to allow a further transition / complying/correction time to the existing Commodity exchange(s) beyond 30.09.2009 to 31.03.2010. This would comprise the last opportunity for the Commodity Exchange(s) to divest foreign equity, equal to the amount by which the cap was being exceeded, in accordance with Press Note 2(2008). Non-compliance after 31.03.2010 would be a violation of the Foreign Exchange Management Act, 1999.




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