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NISM Certifications · NISM-Series-VI: Depository Operations · Foreign Portfolio Investors (FPI)

A Category II FPI holds listed Indian equity worth significant value. Which of these is the correct rule about investing in Indian equity by an FPI under the FEMA framework for FPIs, as taught in the depository syllabus?

A single FPI together with its investor group must hold below 10% of a company's total paid-up equity capital, and total FPI holding is capped by the sectoral limit. Crossing the 10% level means the holding is treated as FDI. Unlimited, 49% or 1% limits are incorrect.

  1. AAggregate FPI holding in an Indian company is subject to a ceiling linked to the sectoral cap, while a single FPI (with its group) must stay below 10% of the company's total paid-up equity capitalCorrect
  2. BA single FPI may hold up to 49% of any company without restriction
  3. CFPIs may hold any amount without limits in all companies
  4. DA single FPI is limited to 1% of paid-up capital per company

Explanation

Individual FPI (with investor group) holding is limited to below 10% of the total paid-up equity capital of a company on a fully diluted basis; crossing it makes the holding treated as FDI. Aggregate FPI limits are tied to the sectoral cap. The 49%, unlimited and 1% options do not reflect the rules.

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