Central Bank to raise FPI investment cap to boost capital inflows.

India’s central bank is set to increase the investment cap for individual foreign investors in listed companies from 5% to 10%, aiming to boost capital inflows, according to senior government officials and documents reviewed by Reuters.

Why Is This Happening?

Foreign portfolio investors (FPIs) have pulled more than $28 billion from Indian stocks since September due to poor earnings, high valuations, and concerns over U.S. tariffs. To attract more foreign investment, India is extending benefits previously available only to overseas Indians to all foreign investors and raising investment limits.

Central Bank’s Push for Quick Implementation

In a letter to the government last week, the Reserve Bank of India (RBI) urged quick implementation, citing concerns over capital inflows. Neither the finance ministry, RBI, nor SEBI (the market regulator) responded to requests for comment.

Key Changes in Investment Limits

Individual foreign investors can now hold up to 10% in a listed Indian company, up from the current 5% limit for Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs) under FEMA (Foreign Exchange Management Act) rules.

The combined holding limit for all overseas individual investors in an Indian listed company will increase from 10% to 24%.

Concerns Over Compliance & Monitoring

While the RBI and the government support the move, SEBI has raised concerns about monitoring compliance. It warned that a single foreign investor, along with associates, could exceed 34% ownership, potentially triggering takeover regulations.

Under Indian rules, any investor acquiring more than 25% of a company must make an open offer to buy shares from retail investors. SEBI has advised caution to prevent unintentional takeovers.

Final Steps

The government, RBI, and SEBI are in the final stages of discussion. Officials are working on regulatory adjustments to ensure smooth implementation while preventing loopholes that foreign investors could exploit.

This move is expected to strengthen India’s position as an attractive destination for global investors while balancing regulatory oversight.