An employee counts U.S. one-hundred dollar banknotes as a bundle of Indonesian 100,000 rupiah banknotes sits on a counter at a currency exchange store in Jakarta, Indonesia. (Photographer: Dimas Ardian/Bloomberg)

Foreign Investors Need To Fill Only One Form To Enter Domestic Capital Market

The government has introduced a single application form for foreign investors to enter into the domestic capital market as part of the exercise to improve the ease of doing business.

Earlier, foreign portfolio investors had to file a separate form to register themselves with the Securities and Exchange Board of India. Besides, they had to approach banks for opening bank accounts, income tax department for PAN (permanent account number) and market intermediaries for demat accounts.

Finance Minister Arun Jaitley in his 2017-18 Budget speech had said a common application form for FPIs would be devised to enhance operational flexibility and ease of access to Indian capital markets.

The central government has now notified “the common application form...for the purpose of registration, opening of bank and demat accounts, and application for PAN by FPIs in India”.

The long-pending single combined application form for registration of FPIs with the SEBI, allotment of PAN and Know Your Customer for opening bank and demat accounts is expected to reduce time and cost for foreign investors.

The common application form was prepared jointly by SEBI, Reserve Bank of India and Central Board of Direct Taxes.

According to the notification of the Department of Economic Affairs in regards to the common application form, FPIs will have to provide information regarding ‘ultimate beneficial owner’ of investments.

Also read: SEBI May Junk Plan To Identify High-Risk Countries For Foreign Investments 

Last week, SEBI had extended the deadline for FPIs by two months till December for providing a list of beneficial owners and assured them that issues raised will be looked into by an expert panel.

According to the form, for KYC purposes, the individual custodian/designated depository participants can seek additional information based on their independent evaluation and risk classification of FPI applicants “on the basis of multiple parameters such as home jurisdiction, type of entity, nature of business”.

On the government’s move, Naveen Wadhwa, deputy general manager at Taxmann, said integration of multiple compliance forms is a great initiative. “This is similar to the new company incorporation form introduced last year which enables the applicant to apply for PAN/Tax deduction and collection account number at the time of incorporation of company itself.”

Making the compliances easy for foreign investors would not only bring up their confidence on Indian market, but it will also help to push India ranking in the Global Index of Ease of Doing Business, he said.

According to the latest depository data, foreign portfolio investors pumped in a net sum of Rs 2,048 crore into equities during Aug. 1-24  and a net amount of Rs 4,662 crore into the debt market, taking the total to Rs 6,710 crore.

Also read: Foreign Portfolio Investors’ Net Inflow At Rs 2,300 Crore In July