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

An FPI holds shares of an Indian company. Its aggregate holding, together with all FPIs, is nearing the sectoral cap. Which of the following best describes the monitoring arrangement for FPI investment limits?

Depositories, in coordination with the RBI, monitor aggregate FPI limits and issue alerts as holdings approach the ceiling. Individual DPs cannot decide this because the limit is aggregate across all FPIs, and monitoring is not left only to the registrar or done manually.

  1. ADepositories monitor the limits and the company is notified through a system of cut-off alerts, with the Reserve Bank coordinating the processCorrect
  2. BThe DP of each FPI independently decides when trading must stop
  3. CThe issuer company's registrar alone monitors the limit with no depository role
  4. DSEBI monitors it manually each month with no automated system

Explanation

Aggregate FPI limits are monitored by the depositories with RBI coordinating, using a system of alerts as holdings approach the ceiling and a red-flag when the limit is reached. A single DP cannot decide this, since the limit is aggregate across FPIs; the registrar alone does not monitor it, and it is not manual monthly monitoring by SEBI.

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