"The ceiling for FDI in ARCs has been increased from 49 per cent to 74 per cent subject to the condition that no sponsor may hold more than 50 per cent of the shareholding in an ARC either by way of FDI or by routing through an FII," the RBI said in a notification.
The foreign investment limit of 74 per cent in ARC would be a combined limit of FDI and FII.
"The prohibition on investment by FII in ARCs will be removed. The total shareholding of an individual FII shall not exceed 10 per cent of the total paid-up capital," the RBI said.
The RBI notification follows Cabinet decision earlier this month to liberalise Foreign Direct Investment (FDI) norms in various sectors.
Further, the RBI also allowed foreign institutional investors (FIIs) to invest in Security Receipts (SRs) up to 74 per cent of each tranche of scheme of SRs issued by the ARC.
"The individual limit of 10 per cent for investment of a single FII in each tranche of SRs issued by ARCs may be dispensed with. Such investment should be within the FII limit on corporate bonds prescribed from time to time, and sectoral caps under the extant FDI Regulations should be complied with," it said.