Here I'm describing about FII. TOPICs covered __What is FII,regulation for investing in Indian companies, the eligibility for applicant seeking FII registration, advantages, disadvantages, FDI vs FII, conclusion
3. WHAT WE EXPLORE THROUGH FII !
WHAT IS FII ?
REGULATIONS FOR INVESTING IN INDIAN COMPANIES
THE ELIGIBILITY CRITERIA FOR APPLICANT SEEKING FII REGISTRATION
ADVANTAGES OF FII’S
DISADVANTAGES OF FII’S
FDI VS FII
ADDITIONAL ( RECENT CHANGES IN FII BY SEBI )
4. WHAT IS FII ?
Foreign institutional investors (FII) refer to those large investors /
companies investing in other countries financial markets except their own
home country. All fiis take a position in a foreign financial market on behalf of
the home country in which they are registered.
Therefore, Foreign Institutional Investor (FII) means “an institution
established or incorporated outside a country (India) which proposes to make
investment in that country(India) in securities, real property and other
5. India opened its stock market to Foreign Institutional Investors (FII) in
September 1992. Since 1993, India received portfolio investment from
foreigners in the form of Foreign Institutional Investment (FII) in equities.
In order to trade in Indian equity market, all Foreign Institutional
Investors (FII) must register with the Securities and Exchange Board of
India (SEBI) which is the regulator for the securities market in India.
Institutional investors most notably include hedge funds, banks, large
corporate buyers or representatives of large institutions, insurance
companies, pension funds and mutual funds.
6. REGULATIONS FOR INVESTING IN INDIAN COMPANIES
All FIIs are allowed to invest in India's primary and secondary
capital markets only through the country's portfolio investment
scheme (PIS). This scheme allows FIIs to purchase shares and
debentures of Indian companies on the normal public exchanges in
However, there are many regulations included in the scheme.
There is a ceiling for all FIIs that states the max investment amount
can only be 24% of the paid-up capital of the Indian company
receiving the investment. The max investment can be increased
above 24% through board approval and the passing of a special
resolution. The ceiling is reduced to 20% of the paid-up capital for
investments in public sector banks.
The Reserve Bank of India monitors daily compliance by
implementing cut-off points 2% below the max investment amounts.
7. THE ELIGIBILITY CRITERIA FOR APPLICANT SEEKING FII REGISTRATION
As stated by Regulation 6 of SEBI (FII) Regulations, 1995, Foreign Institutional Investors
are required to accomplish the following conditions to qualify for grant of registration :
Applicant should have track record, professional competence, financial soundness,
experience, general reputation of justice and must be legally permitted to invest in
securities outside the country.
The candidate should be regulated by an appropriate foreign regulatory authority in
the similar capacity/category where registration is sought from SEBI.
The candidate is required to have the permission under the provisions of the Foreign
Exchange Management Act, 1999 from the Reserve Bank of India.
SEBI Fees (SOURCE : www.bseindia.com )
CATEGORY 1:Govt. & Govt. related foreign investors Intl./ Multi Lateral Org./
( FEE-- NIL ; For block of 3 yrs)
CATEGORY 2 & 3 : Appropriately regulated Institutions/ Persons / Broad based funds
(US $ 3,000 = ₹ 2,08,471.93 )
8. AS PER THIS WEBSITE ( I DON’T SAY ABOUT IT’S
As per the latest available shareholding pattern (as of March 31, 2015)
9. ADVANTAGES OF FIIs
FII’s will enhance the flow of capital into the country.
These investors generally prefer equity over debt. So this will also
help maintain and even improve the capital structures of the
companies they are investing in.
They have a positive effect on the competition in the financial
FII help with the financial innovation of capital markets.
These institutions are professionally managed by asset managers
and analysts. They generally improve the capital markets of the
10. DISADVANTAGESOF FIIs
The demand for the local currency (rupee) increases. This
can cause severe inflation in the economy.
These FII’s drive the fortune of big companies in which
they invest. But their buying and selling of securities have
a huge impact on the stock market. The smaller companies
are taken along for the ride.
Sometimes these FII’s seek only short-term returns. When
they pull their investments banks can face a shortage of
11. Firstly FDI is a direct investment made in one particular business
or company. The aim is to get a controlling interest in the
business. FII, on the other hand, are funds which are invested in
the foreign financial market.
There are many regulations and rules with respect to FDI. In fact,
there are some industries like nuclear energy, agriculture etc.
where there can be no foreign direct investment. But FII has fewer
barriers for entry or exit from the market.
FDI is not only transfer of funds or capital. There is a transfer of
technology, R&D, know-how, strategies, technical knowledge, and
many other such aspects. In the case of FII, only the transfer of
funds is there.
FDI vs FII
• FIIs play a big role in the development of our economy. The amount
of funds they invest is very considerable. So, when such FII’s buy
shares and securities the market is bullish and trends upwards. The
opposite may also happen when they withdraw their funds from the
markets. So they have considerable sway over the market.