Foreign Portfolio Investment is an investment made by investors who are willing to invest in a foreign country. FPI involves holding financial assets like stocks, bonds, mutual funds, pension funds, ETFs, etc in a foreign country.
FPIs are investments in the financial assets of the foreign company to an extent of 10% of the total issued capital of the company. Further, the investor does not actively hold the financial assets under FPIs. Whereas FDIs are investments in the capital instruments of the foreign company and provide ownership in the company's assets and decision-making. Any investment which exceeds 10% of the total issued capital of a company shall be considered an FDI. .
FPIs are regulated by the Securities Exchange Board of India which is the security market regulator in India.
The Foreign Portfolio Investments are valid permanently unless suspended or canceled by the DDP or surrendered by the foreign portfolio investor himself. However, the validity is subject to the payment of registration/renewal fees every three years.
The maximum ceiling limit of FPI shareholding in an Indian company is 10%of the total share capital issued.
Yes, FPI is less risky and more liquid as compared to FDI because in FPI the investor does not have direct control over the company assets.
The security market regulator of the resident country of the Foreign Portfolio Investor must be a signatory to the MOU of the International Organization of Securities Commissions or a signatory to the bilateral MOU entered with the SEBI. In addition to this, the resident country should not have been identified in the public statement of the Financial Action Task Force. In case the applicant is a bank, then the central bank of the applicant's resident country should be a member of the Bank for International Settlement. In this way, the rules of resident country affect the registration of Foreign Portfolio Investor in India.