| Consider the following statements regarding 'exit options' to the foreign investors. |
| 1. The Non-resident investors of listed companies can exit at the market price prevailing at the stock exchanges. |
| 2. The lock-in period for defence and construction sector has been kept at 3 years unlike the other sectors where it will be at least a year. Which of the statement given above is/are correct? |
A) 1 only
B) 2 only
C) Both 1 and 2
D) neither 1 nor 2
Correct Answer: C
Solution :
[c] Relaxing the Foreign Direct Investment (FDI) norms, the Reserve Bank of India, in January 2014, gave foreign investors an option to exit their investments by selling their holdings of equity or debt. According to the modified norms, FDI contracts can now have optionality clauses, which allow investors to exit, subject to the conditions of minimum lock-in period and without any assured returns. Until now, only equity shares or compulsorily and mandatorily convertible preference shares or debentures could be issued to person resident outside India under the FDI policy, and these instruments were not allowed to have any optionality clause. It is expected that this relaxation will facilitate greater FDI flows into the country.
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