Commodity exchanges told to follow foreign investment norms

August 20th, 2008 - 4:51 pm ICT by IANS  

New Delhi, Aug 20 (IANS) Commodity exchanges have to bring their foreign investment component to the prescribed level by June 30, 2009, the commerce ministry said Wednesday. The ministry also issued guidelines relating to foreign investment in Indian projects - as some commodity exchanges have overseas funds above the ceiling of 49 percent.

“It has been brought to the notice of the government that some of the existing commodity exchanges had foreign investment above the permitted level,” said an official statement.

“The commodity exchanges will be required to divest foreign equity equal to the amount by which the cap was being exceeded,” it said.

Non-compliance after June 30, 2009 would be a “violation of the Foreign Exchange Management Act, 1999”.

The statement said the government had laid the guidelines for foreign investment in commodity exchanges in its guideline issued March 12.

A composite 49 percent ceiling for foreign investment was allowed with prior government approval, provided the investment under the portfolio investment scheme (PIS) would be limited to 23 percent, and foreign direct investment was limited to 26 percent.

“Further, no foreign investor (or) entity including persons acting in concert will hold more than five percent of the equity in these companies,” the government said.

The ministry said a transition or correction time would be allowed to help commodity exchanges comply with the guidelines.

The statement further said that all commodity exchanges are required to furnish a compliance report informing the foreign investment in the commodity exchange as of June 30, 2008 along with details of equity structure, to the Department of Industrial Policy and Promotion, the Department of Consumer Affairs, the Foreign Investment Promotion Board, the Forward Market Commission and the Securities and Exchange Board of India.

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