EQUITY OF FPI (Syllabus: GS Paper 3 – Economy)

News-CRUX-10     6th May 2024        
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Context: Recently, the Securities and Exchange Board of India (Sebi) implemented measures to enhance non-resident Indian (NRI) and overseas citizens of India (OCI) access to Indian equity assets through the foreign portfolio investment (FPI) route.

About Non-Resident Indians (NRI)

  • Definition: An NRI is a person who resides outside India while holding citizenship of India.
  • Classification Criteria: NRIs include individuals residing outside India for employment, business, or any vocation.
  • Eligibility: An individual automatically acquires the status of an NRI, if he has resided in India for less than 182 days.
  • Legal Recognition: Indian law recognizes NRIs as citizens living outside the country's borders. They maintain legal ties to India while residing elsewhere.
  • Voting Rights. NRIs have limited voting rights. They can vote in Indian elections only if they are physically present in their respective constituencies during the voting period.
  • Significance: NRIs play a significant role in India's diaspora and contribute to various sectors such as economy, culture, and society.

Overseas Citizen of India

  • Introduction of OCI Card: The Government of India introduced the OCI card in 2005.
  • Purpose: The OCI card allows foreign citizens of Indian origin to live and work in India indefinitely.
  • Eligibility Criteria: A person of Indian origin who is a foreign national can register as an OCI cardholder under Section 7A of the Citizenship Act, 1955.
  • Rights and privileges: The ability to travel to India without a visa, work and study in India, own property (except for certain agricultural and plantation properties), and participate in financial transactions.
  • Restrictions: They are not eligible for certain rights available to Indian citizens, such as voting rights, holding constitutional positions, or government employment.

foreign portfolio Investment (FPI)

  • Definition: FPI involves investors purchasing and holding various foreign financial assets outside their home country's borders.
  • Investment Instruments: Foreign portfolio investors can choose from a variety of financial instruments including stocks, bonds, mutual funds, derivatives, and fixed deposits.
  • Objective: To inject funds into foreign stock markets with the expectation of generating rapid returns on investment.
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