With reference to the RBI's operational framework for reclassifying Foreign Portfolio Investment (FPI) to Foreign Direct Investment (FDI), consider the following statements: 1. Reclassification must be initiated within five trading days from the date of settlement of the trade causing the breach. 2. The facility of reclassification is permitted even in sectors where FDI is prohibited. 3. Once reclassified as FDI, the investment continues to be treated as FDI even if the holding falls below the 10 percent threshold. Which of the statements given above is/are correct?

Question

Accepted Answer

C. 1 and 3 only — Statement 1 is correct; the option to reclassify must be exercised within 5 trading days. Statement 2 is incorrect; reclassification is strictly not permitted in any sector where FDI is prohibited. Statement 3 is correct; post-reclassification, the entire investment is treated as FDI indefinitely to establish regulatory consistency.

RBI operationalises framework for reclassifying FPI to FDI

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