SEBI recommends simpler norms for foreign investors

FIIs and QFIs to be merged into a new investor class called “Foreign Portfolio Investor”

January 01, 1970 5:30 IST | India Infoline News Service
Market regulator SEBI (Securities and Exchange Board of India) on Wednesday released its recommendations for improving foreign flows into the market.

Existing FIIs (foreign institutional investors), sub accounts and qualified foreign investors (QFIs) to be merged into a new investor class called “Foreign Portfolio Investor” (FPI). The aggregate investment limit will be 24% (being the present default aggregate limit for FIIs, which can be raised by the company up to the sectoral cap), the SEBI said in a press release.

In view of the special nature of the investments from non resident Indians (NRIs) and foreign venture capital investors (FVCIs), it was felt desirable to continue with these two classes for the present: NRIs to continue to have individual investment limit of 5% and aggregate investment limit of 10%.

FVCI – The Committee felt that the present list of nine sectors should be considerably expanded. Alternately a negative list may be announced by GoI so that rest of the sectors are opened for VCF activity.

In a significant move to make the procedure much simpler, the Committee recommended that prior direct registration of FIIs and Sub Accounts with SEBI should be done away with.

Instead, FPIs would be able to register themselves with and transact through Designated Depository Participants (DDPs). The qualification of DDPs would be as prescribed by SEBI. 

By combining FII and QFI regime, SEBI has taken the first step in its journey to simplify the regulatory maze that investors face while investing in India. Delegating registrations to designated depository participants (DDPs) and simplifying the KYC (know your customers) documentation will ease foreign investor entry into India. Foreign investors will look forward to quick implementation of these recommendations,” Suresh Swamy, Executive Director, PwC India, said.

Portfolio investments to be defined as investment by any single investor or investor group, which shall not exceed 10% of the equity of an Indian company. Any investment beyond the threshold of 10% shall be considered as Foreign Direct Investment (FDI).

The Committee has also dealt with migration of FPI into FDI and situations where FDI investments fall below 10%.

With the simplification of procedures in KYC/ Account opening and onboarding etc., the Committee believes it will make the experience for FPI of entering into India more pleasure some and smooth, resulting in increasing inflows into India, the release said further.

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