"The Finance Ministry has written to DIPP to extend FDI regulations to warrants. The policy should stipulate that the payment by the warrant holder is made within a year of the issuance of the instrument," a government official said.
The move will also help to improve capital inflows as warrant holders will have to make payments within a stipulated time.
"The changes will bring about clarity in foreign investment and the overseas investor will not have to approach the FIPB every time for clearance," the official said.
While the Department of Industrial Policy and Promotion (DIPP) formulates foreign direct investment policy, the Foreign Investment Promotion Board, which is under the Finance Ministry, approves proposals.
Warrants are financial instruments issued by companies and can be converted by holders into equity at a pre-determined price within a specified time.
The government recently liberalised foreign investment norms and raised FDI caps in sectors such as telecom, aviation and retail in a bid to promote foreign investment and combat volatility in the rupee's exchange rate.
Foreign direct investment into India rose 12 per cent to USD 1.65 billion in July from USD 1.47 billion a year earlier.