28.Foreign Direct Investments (FDI) Flashcards
What are the two categories of Foreign Portfolio Investments (FPI) as per SEBI regulations 2019?
The two categories are:
1.Category one: Includes foreign central banks, pension funds, university funds, banks, insurance companies, etc.
2.Category two: Includes charitable organizations, corporate bodies, family offices, individuals, etc.
What is the investment limit for FPI in a company as per SEBI regulation 2019?
According to SEBI regulation 2019, an FPI can invest below 10% in a company. If it crosses the 10% mark, the investor has five working days to sell the extra stocks, or it will be treated as FDI.
How much can NRIs invest in the capital of a company according to RBI regulations?
As per RBI regulations, NRIs can invest up to 5% in the capital of a company. All NRIs combined can hold up to 25% in the capital of a company.
How do NRIs currently invest in India?
NRIs can currently invest in India through the portfolio investment scheme route, which is regulated by RBI.
What is Foreign Direct Investment (FDI)?
Foreign Direct Investment (FDI) is an investment made by a party from one country into a business or corporation of another country with the intention of establishing a lasting interest.
How does Foreign Direct Investment (FDI) differ from Foreign Portfolio Investments (FPIs)?
The key difference is the element of control. Foreign Direct Investment (FDI) involves actively managing and influencing a foreign firm’s operations, while Foreign Portfolio Investments (FPIs) are passive investments where investors hold securities from a foreign country without actively managing the operations.
How can foreign direct investment be made?
Foreign direct investment can be made by obtaining a lasting interest in a foreign business or by expanding one’s own business into a foreign country.
What is the defining factor that distinguishes Foreign Direct Investment (FDI) from Foreign Portfolio Investments (FPIs)?
The defining factor is control. Foreign Direct Investment (FDI) involves actively managing and influencing the operations of a foreign firm, while Foreign Portfolio Investments (FPIs) are passive investments without control over the operations.
What are the components of Foreign Direct Investment (FDI)?
The components of Foreign Direct Investment (FDI) in India are equity inflows, reinvestment of earnings, and other types of capital.
What does equity inflows refer to in the context of Foreign Direct Investment (FDI)?
Equity inflows include common and preferred shares, reserves, and capital contributions made as part of Foreign Direct Investment (FDI) in India.
What is reinvestment of earnings in Foreign Direct Investment (FDI)?
Reinvestment of earnings refers to the practice of reinvesting the profits earned by a company to expand its operations as part of Foreign Direct Investment (FDI).
What does the category of “other types of capital” encompass in Foreign Direct Investment (FDI)?
Other types of capital include marketable securities such as bonds, debentures, commercial paper, promissory notes, non-participating preference shares, as well as loans, deposits, trade credit, and other accounts payable/receivable in the context of Foreign Direct Investment (FDI).
What are the two routes for Foreign Direct Investment (FDI) in India?
The two routes for FDI in India are the Automatic Route and the Government Route.
How does the Automatic Route differ from the Government Route in terms of FDI?
Under the Automatic Route, private foreign investors can invest in any company without the need for government approval. In contrast, the Government Route requires prior approval from the Government of India for FDI investments.
Does Foreign Direct Investment (FDI) in India have a uniform rate?
No, FDI in India does not have a uniform rate. The percentage of FDI allowed varies depending on the industry, ranging from 26% to 49% to 51%.
