RBI, Finmin demand clarifications on portfolio investments

The Reserve Bank of India (RBI) and the Ministry

of Finance have asked for clarifications over portfolio investments in multi-brand retail sector. The clarification would felicitate listed domestic retailers like Futures Retail attract more foreign investment.

Under the current investment rules, foreign institutional investors (FIIs) can be up to 24 percent in a listed company. This can further be increased up to the sectoral foreign direct investment (FDI) limit through a board resolution endorsed by the shareholders of the company.

Under normal circumstances, FIIs can follow a simple RBI approval but in the case multi-brand retail, FDI, which is currently being considered, policymakers want to tread with caution. In September last year, the government allowed 51 percent FDI in the multibrand retail sector but said prior permission of the government is required.

The central bank has voted in favour of automatic route for such investments on the lines of practice followed in other sectors to make the process easy for those foreign investors interested in investing in retailers such as Future Retail. Future Retail, had applied to FIPB last February and has now appealed to finance minister P Chidambaram for a final decision on the issue. FIIs currently hold 24.89 percent stake in the Future Retail.