The Securities and Exchange Board of India (SEBI) has introduced a proposal to enhance the involvement of Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs) in the Indian securities market using the Foreign Portfolio Investor (FPI) route. FPI denotes the acquisition and retention of various foreign financial assets by investors aiming to invest in foreign markets. Managed by SEBI, FPI in India covers investment groups like Foreign Institutional Investors (FIIs) and Qualified Foreign Investors (QFIs). Unlike Foreign Direct Investment (FDI) which involves ownership stakes, FPI focuses on foreign asset investment such as stocks and bonds without control over the entity.
Facts/Terms for UPSC Prelims
- Foreign Portfolio Investment (FPI): FPI encompasses a range of foreign financial asset holdings by investors seeking international investment diversification. Regulated by SEBI, it includes FIIs and QFIs. Unlike FDI, FPI doesn’t grant ownership control over foreign entities.
- Foreign Direct Investment (FDI): FDI involves an investor from one country establishing lasting interest and influence in an enterprise in another country. It differs from FPI as it grants ownership and control over foreign entities, fostering long-term economic links.
- Non-Resident Indians (NRIs): NRIs are Indian citizens residing abroad. SEBI’s proposal aims to increase their engagement in the Indian securities market through the FPI route, potentially boosting investment inflows.
- Overseas Citizens of India (OCIs): OCIs are individuals of Indian origin holding foreign citizenship. The SEBI proposal intends to enable OCIs to participate more actively in the Indian securities market using the FPI route.
- Foreign Institutional Investors (FIIs): FIIs are entities that invest in the financial markets of foreign countries. They are part of the FPI category and play a crucial role in the Indian securities market’s foreign investments.
