RBI's New Framework for Converting FPI to FDI: Key Changes and Implications
| Aspect | Details |
|---|---|
| Why in News | RBI introduces a new framework for FPI to FDI conversion. |
| Effective Date | November 11, 2024 |
| Key Change | FPIs can convert excess holdings (above 10%) into FDI with government and company approvals. |
| Reclassification Time | Must be done within five trading days of exceeding the 10% limit. |
| Compliance | FPIs must report to SEBI and halt additional equity purchases until reclassification is complete. |
| Sectoral Restrictions | Conversion is not allowed in sectors with FDI caps or prohibitions. |
| Custodian Role | Custodians must notify SEBI and transfer shares to an FDI-designated demat account. |
| FPI vs. FDI | FPI: Short-term investments through stock markets. FDI: Long-term equity investments. |
| Tax Implications | Reclassified investments may be subject to different tax rules, including TDS on sale. |