Background:
Foreign Portfolio Investments (FPIs) are governed in India by SEBI (Foreign Portfolio Investors) Regulations 2014 (‘SEBI FPI Regulations’), Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2017 (‘FDI Regulations’) and RBI Master Direction No. 11/2017-18 on Foreign Investment in India, as amended time to time. FPI refers to foreign investment in India subject to such conditions stipulated in relevant SEBI and RBI regulations. Prior to SEBI FPI Regulations, such investments were governed by SEBI (Foreign Institutional Investors) Regulations, 1995 (‘FII Regulations’), NRI Regulations and QFI Regulations issued by SEBI and RBI. India liberalized its economy in 1991 in order to save itself from severe economic crisis. While granting bailout to India at that time, World Bank and IMF stipulated many conditions and of which bringing out changes to foreign trade policy was one major item. Accordingly, India brought in FII regulations governing its foreign investments in 1995. Considering changes to global economic scenario, FII regulations were repealed and FPI regulations (subsuming FII Regulations) were brought in. In today’s world, the words FII and FPI are widely used interchangeably.
Read more: Foreign Portfolio Investors - SEBI and FEMA Perspective