Foreign Portfolio Investment (FPI)

Question 1

Q. What do you mean by FPI ? What is the current status of FPI in India ?

Answer 1

Ans : *Meaning : FPI regime came as a harmonised route of foreign investment in India, merging the 2 existing modes of investment i.e. FII & QFI.
* Status of FPI in India :
- Fluctuating nature : FPI in India has fluctuated drastically in the past decade.
- Magnitude : In 2022-23, the net FPI in India was to the tune of Rs. 1.65 lakh crore ( close to 0.6% of the GDP).

Question 2

Q. What are some existing provisions for FPIs in India ?

Answer 2

Ans : 1. Regulated by SEBI under SEBI (Foreign Portfolio Investors) Regulations, 2019 .
* SEBI has prescribed certain limits on the investment that FPIs can make in Indian securities.
2. Legislation Provisions :
* FEMA, 1999 is the primary legislation governing FPI in India.
* PMLA, 2002 .

Question 3

Q. What are some issues identified with FPIs ?

Answer 3

Ans : 1.Concentrated investments : in a single company/group.
2. Circumvention of Press Note 3 (PN3) stipulations : PN3 requires that an entity of a country that shares a land border with India can invest only under the Government route.
3. Failure to disclose Related Party Transactions (RPTs).

Question 4

Q. What are some proposals by SEBI for FPI regulation ?

Answer 4

Ans : 1. Categorisation of FPIs : into low, moderate and high risk FPIs.
2. Enhanced transparency measures for high-risk FPIs.
3. Additional disclosure.