New Delhi: In the wake of a revision in the Know Your Client (KYC) norms and eligibility conditions for Foreign Portfolio Investors (FPIs), Department of Economic Affairs (DEA) Secretary Subhash Chandra Garg said an increase in FPIs would take place, which would have a positive impact on capital inflow and the current situation of the Indian Rupee.
“In April, the Securities and Exchange Board of India (SEBI) had come out with a circular for Persons of Indian Origin (PIOs) and Non-resident Indians (NRIs) who dealt with investments via asset management companies. However, there were some issues with the norms mentioned in this circular. Soon after, the SEBI constituted a committee and looked into the grievances of these people and released a new circular. I feel that now, investors will enthusiastically enter the market once again. Also, an increase in FPIs positively impacts capital inflow and the Rupee,” Garg told ANI.
The market regulator on Friday announced a revision in the KYC norms for FPIs, taking cognisance of the recommendations of the SEBI Working Group headed by H. R. Khan.
As per the new norms, NRIs and Overseas Citizens of India (OCIs) shall have the same meaning as assigned to them under regulation 2 of the Foreign Exchange Management (Transfer or issue of security by a Person Resident outside India) Regulations, 2017, the SEBI noted.
NRIs, OCIs and Resident Indians (RIs), the SEBI noted, can be constituents of FPIs, if the contribution made by them, including those of NRI/ OCI/ RI controlled investment managers (IMs), is below 25 per cent from a single NRI/ OCI/ RI and in aggregate, below 50 per cent to corpus of FPI. The SEBI also stated that NRIs/ OCIs/ RIs should not be in control of FPIs.
As per the latest norms, FPIs can be controlled by IMs which are controlled and/or owned by NRIs/ OCIs/ RIs if IMs are appropriately regulated in their home jurisdiction and are registered with the SEBI as non-investing FPIs; or an IM is incorporated or setup under Indian laws and appropriately registered with the SEBI.
Furthermore, a non-investing FPI may be directly or indirectly fully owned and/or controlled by an NRI/ OCI/ RI. The restriction that NRIs/OCIs/RIs should not be in control of FPIs, the SEBI said, will not apply to FPIs which are ‘offshore funds’ for which a no-objection certificate has been provided by the Board in terms of SEBI (Mutual Funds) Regulations, 1996.
Existing FPIs and new applicants shall be given a time period of two years from the date of coming into force of the amended regulations or from the date of registration, whichever is later, in order to satisfy these eligibility conditions. In case of temporary breach, a time period of 90 days will be given to ensure compliance with the prescribed conditions, the SEBI said.