The Indian government has
classified Foreign Portfolio Investors (FPIs) from Cyprus as eligible for Category
I licence. This classification is expected to prompt more and larger investment
funds from the European Union to route their investments through Cyprus.
Foreign investors are
permitted to invest in Indian securities (shares, bonds, debentures, etc.) through
different ways, such as Foreign Direct Investment, Foreign Portfolio Investment,
Foreign Venture Capital Investment, Alternative Investment Fund, etc. with FPI
being one of the most preferred routes.
Funds coming from non-FATF
countries can also obtain Category I FPI registration in case the central
government of India approves so. Cyprus is the third such country, after
Mauritius and UAE, to be given approval. The approval was given through Order
dated 14 June 2021 under the Securities and Exchange Board of India (SEBI)
(Foreign Portfolio Investors) Regulation, 2019.
Category I FPI License
provides important advantages to investors, such as exemption from Indirect
Transfer Provisions related to Indian tax (which are otherwise applicable to overseas
investors upon transfer of shares in an overseas entity with assets in India),
higher position limits for investing in derivatives, etc.
