NRI investments become more attractive.

Finance Minister Nirmala Sitharaman on Sunday announced a proposal to double the individual shareholding limit for persons resident outside India (PROI) from 5 per cent to 10 per cent, and raise the combined ceiling from 10 per cent to 24 per cent, alongside opening a direct equity investment route for overseas individuals through the Portfolio Investment Scheme (PIS)

📌 Current Regulatory Framework

Under existing foreign investment rules (Foreign Exchange Management Act / RBI/SEBI framework):

• An individual Non-Resident Indian (NRI) or PIO is allowed to invest in equity of an Indian listed company up to 5% of the company’s paid-up capital.
• The aggregate holding by all NRIs/PIOs together is capped at 10% of the paid-up capital of that company.

• This essentially doubles the permissible individual stake that a PIO (and, under the proposal, all foreign individuals) can hold directly in Indian listed companies.
• At the same time, the overall cap for combined holdings of all overseas individuals could be raised (e.g., from 10% to 24%) — though that broader combined limit is part of the wider reform discussions rather than the specific PIO cap itself.

📌 Why This Proposal is Significant

1. Attracting Capital Inflows

• India has experienced periods of capital outflows from equity markets in recent times, and broadening investor eligibility while increasing caps is aimed at making Indian equities more attractive to global individual investors.

2. Levelling the Playing Field

• The proposal would extend benefits previously available mainly to NRIs/PIOs to a wider class of foreign individual investors, encouraging diverse global participation in Indian markets.

3. Potential Corporate Governance/Coverage Effects

• Higher individual stakes by foreign investors might enhance liquidity and market depth, but also raise monitoring and regulatory compliance considerations (e.g., ensuring that combined beneficial holdings don’t inadvertently breach thresholds that trigger open-offer requirements).

Conclusion:

It's good that India acknowledges the value of investments and the limitations of NRIs. It's high time to keep the global political situation in mind to open the gates for NRIs to invest. The NRIs’ investments now plays pivotal role for the financial advisors, and it's an opportunity to grow.