The Different Types of Foreign Investment
There are four types of foreign investment in the country: Foreign Direct Investment, Foreign Portfolio Invesment, Foreign Institutional Investment and Extra Commercial Borrowings. Let's take a closer look at each type:
Foreign Direct Investment (FDI)
Foreign Direct Investment (FDI) refers to when a foreign company acquires a controlling stake or establishment in an Indian company, it is known as Foreign Direct Investment. FDI inflow is crucial in the market. Moreover, there are three types of FDI: Horizontal FDI, Vertical FDI, and Conglomerate FDI.
Foreign Portfolio Investment
If a foreign company purchases a bond, stock, or mutual fund without seeking control over the company, then it's known as a Foreign Portfolio Investment.
Foreign Institutional Investment (FII)
When foreign companies invest in stocks or bonds using the Indian stock market, it is known as Foreign Portfolio Investment or FII.
Extra Commercial Borrowings (ECB)
If you are an Indian company and you have borrowed some funds from a foreign lender(it can be a financial institution or bank), then it's known as External Commercial Borrowings (ECB).