The government today moved a step closer to making the rupee fully convertible on the capital account by allowing individuals, companies and mutual funds to make equity investments in listed foreign companies. It, however, attached riders to such investments.
Indian individuals can now make unlimited investments in shares of foreign companies while domestic corporates can invest up to 25 per cent of their net worth in listed foreign companies that have at least 10 per cent stake in any listed Indian company. For mutual funds, the government has doubled the overall foreign investment cap to $1 billion.
The move comes against the backdrop of a $70 billion forex pile. But experts feel the appreciating rupee and comparatively lower equity returns and interest rates abroad will keep overseas investments by Indians to a trickle.
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All the relaxations on capital account transactions announced today are for a period of six months beginning January 10.
Making the announcement today at the Ficci-organised Bharatiya Pravasi Diwas programme, Finance and Company Affairs Minister Jaswant Singh said Indian companies with overseas branches would be allowed to buy property for business and staff accommodation besides doing away with limits on advances by export earners foreign currency account-holders and scrapping the $20,000 limit for remittances under employee stock option plans.
The government's rider for investments by mutual funds and individuals is similar to the one for Indian companies