Foreign shareholding limit hiked to 15 per cent in Indian stock exchanges

The increased stake of 15 per cent can be held by an overseas stock exchange, a depository, a banking company, an insurance company, a commodity derivative exchange.

By: ENS Economic Bureau | New Delhi | Published: July 28, 2016 2:36:12 am
Foreign shareholding, stock exchanges, cabinet decisions, defence PSU, defence joint ventures, BSE, NSE, new FDI policy, business news, india news Increased from 5 per cent limit; Move announced in Budget. (Source: Reuters)

The Union Cabinet on Wednesday increased foreign shareholding limit in domestic stock exchanges to 15 per cent from 5 per cent currently — a move that would attract higher foreign capital into exchanges.

The increased stake of 15 per cent can be held by an overseas stock exchange, a depository, a banking company, an insurance company, a commodity derivative exchange.

“The Cabinet has also approved the proposal to allow foreign portfolio investors to acquire shares through initial allotment, besides secondary market, in the stock exchanges,” according to a government statement. The move is aimed at attracting more foreign inflows in stock exchanges like BSE and the National Stock Exchange. Higher foreign shareholding limit would also help BSE and NSE in their plans to list on exchanges.

“The move will help in enhancing global competitiveness of Indian stock exchanges by accelerating/facilitating the adoption of latest technology and global best practices which will lead to overall growth and development of the Indian capital markets,” the government said. The approval is a follow-up to the announcement made by finance minister Arun Jaitley in his 2016 Budget speech. The Cabinet also approved the abolition of existing guidelines for establishing joint venture companies by defence PSUs to meet the goal of indigenous manufacturing.

“The Department of Defence Production came to the conclusion that with the increasing participation of the private industry in defence sector and the transformation taking place in the defence acquisition eco system thereon, the requirement of having separate JV guidelines for Defence Public Sector Units (DPSUs) is no longer considered necessary. “In the emerging scenario with primacy being accorded to indigenous manufacturing/Make in India, it is felt that having multiple set of guidelines may lead to ambiguity and incongruity in the environment,” the government said.

It said the abolition of the existing JV guidelines will provide a level playing field between DPSUs and the private sector and allow DPSUs to forge partnerships in an innovative manner enhancing self-reliance in defence and provide for enhanced accountability/autonomy of DPSUs in ensuring that the process of JV formation is effectively managed by them, so as to secure best outcomes in the interest of national security.

Further, the Cabinet cleared signing of the Bilateral Investment Treaty (BIT) with Cambodia, the first agreement to be inked on the basis of the model BIT text.

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