SEBI-registered foreign institutional investors (FIIs) and their sub-accounts are allowed to invest in Indian depository receipts (IDRs), but they must fulfill conditions laid down by Foreign Exchange Management Act (FEMA).

Taking decision in this regard, the Reserve Bank of India, while issuing regulatory guidelines, said that FEMA will not be applicable to holding of underlying shares.

Non-resident Indians (NRIs) can also invest in IDR even using their NRE/FCNR(B) accounts maintained with an authorized dealer or bank. Rules regarding IDRs were issued by central government, some time back, and are now operational by SEBI and RBI.

Chetan Savla, ED, Kotak Mahindra Capital, said: "The opening up of FII participation in IDRs is significant move for the success of the product, especially since Indian insurance companies have been disallowed from participating in IDRs."

The UK-based Standard Chartered has shown interest in entering the Indian depository receipts (IDRs) market, following the approval from the Indian regulator.

A financial release maintains, "In case of raising of funds through issuance of IDRs by financial/banking companies having presence in India, either through a branch or subsidiary, the approval of the sectored regulator(s) should be obtained before the issuance of IDRs".