New Delhi: The government on Thursday announced flexibility to raise overseas capital as a major policy reform. The move, however, plugged the loopholes for back door FDI entry breaching sectoral caps.

These efforts are aimed at encouraging the country to attract more and more FDI.

Under the new norms, the Indian companies have been permitted to issue equity against capital goods’ imports and liberalise conditions for seeking foreign investment for production and development of seeds.

The government, as per the third Consolidated FDI Policy Circular also removed the preventive condition of obtaining prior approval of Indian companies for making investments in the 'same field'.

"It is expected that this measure will promote the competitiveness of India as an investment destination and be instrumental in attracting higher levels of FDI and technology inflows into the country," it said.

In a major initiative to plug loopholes, the government has classified companies into two categories -- 'companies owned or controlled by foreign investors' and 'companies owned and controlled by Indian investors'.

The government has done away with the earlier categorisation of 'investing companies', 'operating companies' and 'investing-cum-operating companies'.

The policy guidelines are revised every six months.

Earlier, they were required to specify upfront the price of convertible instruments.

The decision "would help the recipient companies in obtaining a better valuation based upon their performance," it added.