Ambiguity over FDI, FII: RBI to soon float discussion paper

NEW DELHI: The Reserve Bank will come out with a discussion paper within 15 days on redefining Foreign Direct Investment ( FDI) and portfolio investment ( FII) so as to remove ambiguities.

"The paper will include questions like legal and taxation issues involved in the implementation of the new definition. How the different instruments of foreign investments would be treated? How it would impact investments in listed and unlisted firms," an official told PTI.

The matter was discussed during the meeting of an eight- member committee headed by Department of Economic Affairs (DEA) Secretary Arvind Mayaram here today. The committee has been appointed for giving clear definitions to FDI and FII.

The official said that the committee would meet again after getting the views of all the stakeholders.

"RBI will circulate the paper within the next 15-20 days," he said.

Other members of the committee include DIPP Secretary, Chief Economic Advisor in DEA, RBI Deputy Governor H R Khan and SEBI Member S Raman.

Mayaram had earlier said that there is a lot of confusion in the mind of foreign investors because of distinction between FDI and FII.

Finance Minister P Chidambaram in his Budget speech had proposed to follow the international practice with regard to defining FDI and FII.

As per the proposed definition, if an investor has a stake of 10 per cent or less in a company, the investment would be treated as foreign institutional investment (FII).

And if an investor has a stake of more than 10 per cent, it would be treated as foreign direct investment (FDI).