Consider the following statements with respect to Foreign Direct Investment in India 1 A foreign inv...........

Economic Affairs Foreign Investment

Consider the following statements with respect to Foreign Direct Investment in India:

1. A foreign investor can hold investments in a certain company, in both FPI(Foreign Portfolio investment route) or FDI(Foreign Direct Investment route) at the same time.

2. An Indian company receiving FDI does not require any prior approval of RBI at any stage.

Which of the statements given above is/are incorrect?

1 only

2 only

Both 1 and 2

Neither 1 nor 2

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Explanation:

Explanation:

Statement 1 is Incorrect: The Government has accepted the international practice regarding the definitions of Foreign Direct Investment and Foreign Portfolio Investment. Hence, in a particular company, an investor can hold the investments either under the FPI route or under the FDI route, but not both.

Statement 2 is Correct: As per the regulations under Foreign Exchange Management Act (FEMA) 1999, an Indian company receiving FDI does not require any prior approval of RBI at any stage. It is only required to report the capital inflow and subsequently the issue of shares to the RBI in prescribed formats under both the routes.