Exempt non-repatriable NRI investments from FDI limits: Mayaram panel

A committee appointed by the previous UPA government to recommend ways of simplifying and streamlining the country's foreign investment regime has suggested treating non-repatriable investments by non-resident Indians (NRIs) as domestic investment and treating investment of over 10 per cent in a listed company as foreign direct investment FDI.

The committee, headed by finance secretary Arvind Mayaram has recommended simplifying the classification of foreign investment and carving out a special category for NRIs within it, ''in view of their special status''. Such investments should also be exempted from FDI-related conditions.

The Mayaram committee has recommended that foreign investment of 10 per cent or more through eligible instruments made in an Indian-listed company be treated as FDI, while such investment by way of equity shares, compulsorily convertible preference shares or debentures totaling less than 10 per cent of the company's equity be treated as FPI.

With a view to removing the ambiguities over the demarcation of FDI and foreign institutional investment, the panel suggested that foreign investment in an unlisted company should be treated as FDI.

Foreign investment in an unlisted company, irrespective of threshold limit, may be treated as FDI. All existing foreign investments below the threshold limit made under the FDI route shall however, continue to be treated as FDI.

If the recommendations are accepted, NRIs making investments of non-repatriable nature would not have to worry about sectoral restrictions and caps as also government approvals otherwise required for foreign investments in Indian companies.

The report of the committee set up last year by the then finance minister P Chidambaram to rationalise the definition of FDI and foreign institutional investment (FII).

The panel's report was made public late on Friday suggested that NRIs, or people of Indian origin living overseas who have set up large businesses abroad and may want to invest through corporate entities may also be permitted with safeguards.

''Overseas Corporate Bodies was one such vehicle, but for various reasons, that has been derecognised in late 2003. With suitable safeguards and checks, this can be revived in a different form and NRI investments enhanced,'' the report said.

Chidambaram, in his 2013-14 budget, introduced new definitions for FDI and FII. While all foreign stakes of 10 per cent or less in a company were defined as FII, or portfolio investment while those above the 10 per cent limit were categorised as FDI.

Market regulator Securities and Exchange Board of India has since notified a new category of investors called foreign portfolio investors (FPIs), clubbing FIIs, their sub-accounts and qualified foreign investors.