New Delhi: The Reserve Bank of India (RBI) on Friday allowed 49 per cent foreign investment in stock exchanges, depositories and clearing corporations in compliance with the regulations of Securities and Exchange Board of India (SEBI).
Within overall foreign investment cap, the FDI would be permitted up to 26 per cent and FII 23 per cent.
However, on a precautionary note no foreign investor will be allowed to hold more than five per cent of the equity in the stock exchanges.
The notifications said that necessary amendments would be carried out in the Foreign Exchange Management Regulations 2000.
Clearance from the Foreign Investment Promotion Board (FIPB) will be mandatory for foreign direct investment in these companies.
While foreign institutional investments will be allowed only through purchases in the secondary market, they will not be allowed to hold representation on the Board of Directors of such companies.
The move is widely expected to benefit demutualisation of stock exchanges beginning with the Bombay Stock Exchange (BSE).
There were reports that NASDAQ and NYSE, among other overseas bourses and funds, were interested in picking stake in BSE.
In August, NASDAQ officials met their counterparts in BSE, giving rise to speculation that the tech exchange would pick up a stake in it.
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