New Delhi: Government has constituted a four-member committee headed by Economic Affairs Secretary Arvind Mayaram for giving clear definitions to FDI and FII, with an aim to remove ambiguity over the two types of foreign investments.
The DIPP Secretary, an RBI Deputy Governor and a SEBI Wholetime Member are the other members of the "high power committee".
It will take about two-and-a-half months to come out with the report, Mayaram said.
"There is a lot of confusion in mind of foreign investors because there is no distinction between FDI and FII... "The committee has been constituted on pursuant to the budget announcements by the Finance Minister. It will simplify definition, what constitute FII and what constitute FDI," Mayaram said.
He, however said, the panel would look at definition of FDI and FII and not the foreign investment caps in different sectors.
"We are looking at definition not cap. How do you define FDI, how do define portfolio investment...The committee will come up with the definition," he said.
At present, if an investor has a stake of 10 percent or less in a company, the investment is treated as foreign institutional investment (FII). If an investor has a stake of more than 10 per cent, it is treated as foreign direct investment (FDI).
"That primarily is on account of fact that 10 percent shareholding gives you some voice in the management...So similarly SEBI also has this requirement that individual FII will not invest more than that in a company," Mayaram added.
Finance Minister P Chidambaram in his Budget speech had proposed to follow the international practice with regard to defining FDI and FII.
The committee would be constituted to examine the application of the principle and to work out the details expeditiously, he had said.