FIIs investment limit raised

MUMBAI, SEPT. 20. In a bid to boost investors confidence, the Reserve Bank of India today hiked the investment limit in companies for foreign institutional investors (FIIs) to the level of foreign direct investment set in various sectors.

Now, FII investment in the company would be governed by investment ceiling for FDI for specific sectors, the RBI said in a statement. The shareholders' and board approval would be necessary for such proposals, the statement added.

At present the investment ceiling in companies for FIIs is 49 per cent. Now the ceiling has been hiked to 74 per cent and beyond on a par with the ceiling for FDI in various sectors.

For instance, in case of pharmaceutical, it will be 74 per cent for FIIs as in the case of FDIs.

This measure comes a day after the Finance Minister, Mr. Yashwant Sinha, assured FIIs in a tele-conference that the Government would come out with a slew of investment friendly measures to boost investors confidence. - PTI

At present, FIIs could automatically buy up to 24 per cent in companies that can be increased to 49 per cent with shareholders' approval. The FDI limit is generally higher for various sectors and the FII investment limit is now on a par with FDI.

In the case of petroleum refining and exploration, airports, trading, roads, highways, ports, hotels and tourism, film industry and mass rapid transport system, the FDI investment limit was 100 per cent. In these sectors, investment by FIIs will be allowed up to 100 per cent.

The statement said today's decision was taken in consultation with the Centre.

While the investment limit for civil aviation is 40 per cent, for private sector banking, telecommunications and broadcasting it would be 49 per cent.

In case of defence and strategic industries and insurance, it would be 26 per cent.

- PTI

Our Mumbai Special Correspondent writes:

The hike in investment limit for FIIs was not able to make any impact on the stock market. ``One needs to be cautious in this uncertain environment,'' felt Mr. Jignesh Shah, strategist of ASK-Raymond James, a leading FII. However analysts believe that it is a positive move in the long term.

CII seeks clarification

By Our Special Correspondent

NEW DELHI, SEPT. 20. The industry has accorded a conditional welcome to the Reserve Bank of India's decision today to allow foreign institutional investors to invest beyond 24 per cent up to the FDI sectoral cap in various sectors. The step could help reverse the trends in the secondary market and improve liquidity, observed the Confederation of Indian Industry (CII).

However, the raising of FII limit would only benefit those companies in which the cap is beyond 49 per cent and not areas like telecom where the upper limit is 49 per cent or banking where the limit is below 49 per cent, said CII. It hoped that the RBI would resolve the issue and draft an appropriate notification within a day or two.

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