The Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 (Rules) stipulate that the aggregate investment by a foreign portfolio investor, along with its investor group (collectively referred to as FPI), must remain below 10% of the total paid-up equity capital of an Indian company on a fully diluted basis (“prescribed limit”). In the event of a breach, the Rules mandate that the FPI must either divest its holdings to fall below the prescribed limit or reclassify its entire investment as Foreign Direct Investment (FDI) within five trading days from the date of settlement of the trades causing the breach. However, the absence of detailed procedural guidelines for such re-classification created ambiguity
