In this budget Finance Minister, had proposed, inter alia, that two-way fungibility of Indian Depository Receipts (IDRs) be permitted subject to a ceiling, with the objective of encouraging greater foreign participation in Indian capital market.

In a move to encourage IDR as an instrument, Sebi said. "To retain the domestic liquidity, it is decided to allow partial fungibility of IDRs (ie redemption/conversion of IDRs into underlying equity shares) in a financial year to the extent of 25 per cent of the IDRs originally issued," Sebi said in a circular.

"Suitable instructions for modifying the existing legal framework governing IDRs, in order to implement the decision to allow redemption of IDRs into underlying equity shares and re-conversion of equity shares of a foreign issuer (which has already listed their IDRs) into IDRs, will be issued separately."

There would be an overall cap of USD 5 billion for raising of capital by issuance of IDRs by eligible foreign companies in Indian markets. This cap would be akin to the caps imposed for FII investment in debt securities andwould be monitored by SEBI, RBI said in the notification.

SEBI, on June 03, 2011, had prescribed the framework for redemption of IDRs into underlying equity shares. The circular has, inter-alia, stated that after the completion of one year from the date of issuance of IDRs, redemption of the IDRs shall be permitted only if the IDRs are infrequently traded on the stock exchange(s) in India.

However, Standard Chartered Bank, is the alone foreign entity that has listed its IDRs on the Indian bourses.

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