In a major overhaul of foreign investment regime, the government is considering splitting overseas inflows into two categories — Foreign Portfolio Investment (FPI) and Foreign Direct Investment (FDI) — with a minimum composite cap of 49 per cent.

The proposal, which is being considered by the Arvind Mayaram panel, envisages an aggregate automatic limit of 24 per cent of FPI, which may be raised up to the extent of FDI permitted under the automatic route, sources said.

The individual investment limit under the FPI, which will comprise Qualified Foreign Investors (QFIs) and Foreign Institutional Investors (FIIs), has been proposed up to 10 per cent of the paid up capital in a listed company.

Any individual investment above 10 per cent, as per the proposal, will be treated as FDI.

In case the company is not listed, the FPI investment would be deemed as FDI, sources said, adding that there will be separate guidelines for investment by non-resident Indians.

The government had set up a four-member committee headed by Economic Affairs Secretary Mayaram to define FDI and FII and remove the ambiguity between them. The Committee is expected to finalise its report by end of this month.

Finance Minister P Chidambaram in his Budget speech had proposed to follow the international practice with regard to the definitions.

The recommendations, sources said, will be applicable with prospective effect and hence will not impact the existing investments.

As per the proposal, an investor will have the option to invest as either FPI or FDI, but not both.

More In: Business | Economy