The new rules, developed in coordination with the government of India and the Securities & Exchange Board of India, establish clear protocols for reclassifying Foreign Portfolio investment (FPI) as Foreign Direct Investment (FDI) when holdings surpass 10 per cent of a company's fully diluted equity capital.

Financial regulators Reserve Bank of India (RBI) and the Securities and Exchange Board of India (Sebi) on Monday directed foreign portfolio investors (FPIs) to obtain necessary approvals from the government and concurrence from the investee companies in cases of acquisition of equity holdings beyond the prescribed limits.

The new framework aims to streamline foreign investments, offering FPIs a compliant route to maintain stakes in Indian firms above the 10% cap.

The Reserve Bank of India (RBI) has streamlined the process for Foreign Portfolio Investors (FPIs) to reclassify their holdings as Foreign Direct Investment (FDI) if their stake in an Indian company exceeds 10 percent.

India's central bank on Monday released an operational framework for reclassifying equity investments made by foreign portfolio investors (FPI) that exceed the prescribed limit as foreign direct investment (FDI).

Currently, an investment made by foreign portfolio investor along with its investor group (FPI) should be less than 10 per cent of the total paid-up equity capital on a fully diluted basis.

The current law says an FPI cannot hold more than 10% of the total paid-up equity capital as portfolio investment in an Indian company. The investment is categorised as foreign direct investment (FDI) if the holding exceeds the 10% limit.