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

Under the FPI framework, an FPI's aggregate holding limit in a single Indian company is monitored by depositories. Which statement correctly describes the individual FPI investment limit and the treatment of breach?

An individual FPI together with its investor group must stay below 10% of a company's paid-up equity on a fully diluted basis. If it breaches this, it can divest the excess within five trading days or have the holding reclassified as FDI, subject to FDI conditions.

  1. AAn individual FPI (with investor group) must hold below 10% of the paid-up equity capital of a company on a fully diluted basis; breaching 10% requires divesting the excess within five trading days or reclassifying the holding as FDICorrect
  2. BAn individual FPI may hold up to 24% without any condition and no breach is possible
  3. CAn individual FPI is limited to 49% and must sell within one year if exceeded
  4. DThere is no individual limit for FPIs, only a sectoral cap

Explanation

The individual FPI limit (with investor group) is below 10% of the total paid-up equity capital on a fully diluted basis. On breach, the FPI may divest the excess within five trading days or have the holding reclassified as FDI, subject to FDI conditions. The other options state limits or timelines that do not exist.

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