Prior permission from RBI will now become mandatory for foreign institutional investors (FIIs) who wish to increase overall holdings in an Indian company beyond 24%. Also, post RBI nod, the Indian companies will need to get the approval of their respective board of directors and shareholders to allow FIIs to hold over 24% stake in the companies. The government has decided to discourage import of sub-standard machinery and withdraw the facility of giving equity in lieu of import of second hand equipment?s after allowing it for a year.

These measures are part of the six-monthly policy review of foreign direct investment (FDI) in the country.

Announcing the consolidated FDI circular on Tuesday, the department of industrial policy and promotion (DIPP) said the FDI circular will come in every 12 months instead of the current half-yearly cycle. The next date for the FDI circular will now be March 29, 2013, DIPP said on Tuesday. During April-January, 2011-12, India attracted FDI worth $26.19 billion, increase of 53% over the same period last year, DIPP said.

As per new circular, the government also decided to allow FDI only in the financial lease by the non-banking NBFCs. ?It has been clarified that the activity of leasing and finance, which is one among the 18 NBFC activities, where induction of FDI is permitted, covers only financial leases and not operating leases,” it said.

The FDI review also allowed Sebi registered foreign venture capital investors to invest in securities on a recognised stock exchange subject to the provisions of the Sebi (FVCI) Regulations, 2000.