Foreign Institutional Investors

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• Foreign institutional investors (FIIs) means an entity established or incorporated outside India which proposes to make investment in India. Positive tidings about the Indian economy combined with a fast-growing market have made India an attractive destination for FIIs.


• FII inflows are called 'hot money' because they can be taken out any time.

Entry Options

• A foreign company planning to set up business operations in India has the two following options.

Incorporated Entity

• By incorporating a company under the Companies Act,1956 through Joint Ventures; or Wholly Owned Subsidiaries


• Foreign equity in such Indian companies can be up to 100% depending on the requirements of the investor, subject to equity caps in respect of the area of activities under the Foreign Direct Investment policy.

Unincorporated Entity

• As a foreign Company through liaison office/representative office, project office and branch office.


• Such offices can undertake activities permitted under the Foreign Exchange Management Regulations, 2000.

Investment Limit For FIIs In Corporate Bonds Raised

• In April, 2010, Security & Exchange Board of India (SEBI) doubled overall investment limit for foreign institutional investors in Corporate Bonds to USD 40 billion. Earlier, the cap was USD 20 billion.


• The government is of the view that raising investment limit would provide opportunities increased inflow in debt securities, catalyse investment in infrastructure sector and increase in the flow of Government Securities and Corporate Bonds market in India.

Economic Data

• India is rapidly becoming the favourite destination for foreign institutional investors because of its robust economic growth potential.


• In 2010, FIIs invested Rs 1,790 billion in Indian market. However, investment in the corresponding previous year was only Rs 834.23 billion.


• In January 2011, the inflow was Rs 53.63 billion, Rs 32.70 billion in the following month and 68.83 billion in March 2011.