India backtracks on consolidated investment caps

Author: Ashley Lee | Published: 29 Jul 2015

India’s plan to streamline separate caps for foreign institutional investors (FIIs) and foreign direct investors (FDIs) will boost its financial markets infrastructure. But a rumoured exclusion of the banking sector would negate much of the changes’ impact.

Under the country’s foreign investment regime, FIIs have lower limits in certain sectors due to the belief that FIIs are so-called hot money; that they will quickly sell when there’s signs of any issues.

On July 16, the government’s cabinet proposed consolidating the separate caps for different industries.

But local press reports indicate that officials from the Ministry of Commerce and Industry (MCI) intend to exclude two sectors many thought would benefit most from the changes.

"We’re still waiting for the actual guidelines to come out, although there’s been a bit of walking back on the sectors where this would have made the biggest differences, namely defence and banking,"...