The Reserve Bank of India (RBI) and finance ministry have approved
the participation of foreign institutional investors (FIIs) in Indian
depository receipts (IDRs). IDRs are Indian counterparts of global depository
receipts that enable foreign companies to raise money from the Indian
markets. The proposal has been forwarded to the ministry of corporate
affairs for clearance before the decision is notified. Sources added
that the ministry of corporate affairs would also consider whether to
allow Non-Resident Indians (NRIs) to subscribe to IDRs since neither
RBI nor the finance ministry has any objection to the proposal, in principle.
In its original form, persons of Indian origin (PIOs) and resident Indians
were permitted to invest in IDRs.
The capital market regulator, Securities and Exchange Board of India
(Sebi), has set Rs 50 crore as the minimum amount for issuing IDRs and
the minimum investment by retail investors has been set at Rs 2 lakh.
NRIs and FIIs are required to take RBI's permission before investing
in such instruments. Sources close to the development said, the decision,
taken a few weeks ago, could revive interest in IDRs. It is expected
to provide an opportunity for foreign companies - with a good track
record in their home countries but unable to bargain for good rates
in those competitive, developed market - to raise funds from India.