Foreign investment rules simplified

New Delhi: Promising a simpler foreign investment regime, the government on Thursday introduced a concept of composite cap for all kinds of overseas inflows including through FDI, FII and NRI routes -- a move that may benefit retail companies and stock exchanges among others.

However, individual FDI and FII limits would continue in two key sectors, banking and defence, a government official said, even as some bankers claimed they might also benefit. Among others, the decision, approved by the Union Cabinet, will benefit credit information firms and other market infrastructure institutions such as commodity and power exchanges, as they can bring in foreign investments either as FDI or FII up to the composite cap.

Finance Minister Arun Jaitley said, "From now onwards, all FIIs, NRIs and other foreign investments will be clubbed. It will be constituted as a composite cap." A government official said the move will provide options to both foreign and domestic investors, but added that no changes have been made with regard to specific foreign investment norms for the banking and defence sectors.

Foreign investment in banking and defence sectors will continue to have separate caps for FII and FDI, the official added. The limit of portfolio investment in banking is capped at 49 per cent while in defence it is 24 per cent. The official said all existing investments will hold good even if they are not exactly in compliance with the new norms.