What is the full form of FDI, FPI and FII
The full form of FDI, FPI and FII are Foreign Institutional Investor (FII)/ Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI).
Difference between - FDI, FPI and FII
Capital is a vital component of economic growth, but since most nations cannot meet their total capital requirements from domestic sources alone, they turn to foreign investors.
Two of the most common ways for investors to invest in an overseas economy are – Foreign Institutional Investor (FII)/ Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI).
Foreign Investments
Any investment that flows from one country to another is called foreign investment. Investment inflows from other countries complement and lead to domestic investment in capital-scarce economies.
In India, foreign investment can take the form of investment (through the capital market) in listed companies, referred to as FII / FPI investment, and investment in listed/unlisted companies other than through stock exchanges is referred to as FDI.
About FDI (Foreign Direct Investment)
Foreign direct investment refers to investment made to acquire a permanent stake in enterprises outside the investor's economy.
- In the case of direct foreign investment, the investor's goal is to gain an effective say in the company's management.
- In other words, companies making such direct investments have significant influence and control over the investee company.
- A foreign entity or a group of affiliated entities that invest is called a "direct investor."
- An enterprise not registered in the commercial register or registered in the commercial register - a branch or a subsidiary in which direct investments are made referred to as a "direct investment enterprise."
- Some degree of equity ownership is almost always associated with an effective voice in the management of the business. A threshold of 10 percent ownership is required for an investor to qualify as a "foreign direct investor."
Foreign Portfolio Investment (FPI)
Foreign portfolio investments are passive holdings of securities such as foreign stocks, bonds, or other financial assets, none of which involve active management or control of the issuer of the securities by the investor; where such control exists, they become a foreign direct investment.
Some examples of portfolio investments are:
- Purchase of shares of a foreign company.
- Buying bonds issued by a foreign government.
- Acquisition of property in a foreign country.
Foreign Institutional Investor (FII)
FII investments help Indian companies improve performance. The foreign institutional investor mechanism has taken steps to allow foreign portfolio investment in the Indian stock market.
An institutional investor is an investment entity that has proposed to invest its funds or on behalf of "broadly based" funds or foreign companies and individuals and belongs to any of the categories listed below, and can be registered as an FII:
- Pension Funds
- Mutual Funds
- Investment Trust
- Insurance or reinsurance companies
- Endowment Funds
- Trustees
- Bank