A man counts Indian currency (Source: Bloomberg)

SEBI Panel May Suggest Single Regime For FPI, NRI Fund Outflows

A SEBI panel may soon suggest merger of foreign portfolio investment and non-resident Indian/overseas citizens of India routes to bring in a single regime for foreign investors and regulate NRI and person of Indian origin fund inflows, senior officials said.

Besides, the panel may suggest to the capital markets regulator to clarify suitable actions that FPIs need to take for divestment or re-classification of holdings as per the FDI limits after consultation with the Reserve Bank of India, they said.

Further, it is likely to suggest the SEBI to consult the government to evolve a more objective criteria for defining high-risk jurisdictions.

The panel headed by former RBI Deputy Governor HR Khan, which is reviewing the FPI regulations, may soon suggest these measures.

“The panel is examining whether any recommendation to merge the FPI and NRI/Overseas Citizens of India routes of investment can be made to the government and the Reserve Bank.
SEBI Official.

Under the Portfolio Investment Scheme, NRIs can directly invest in Indian firms and buy equity stocks and mutual funds, among others. NRI investments are controlled by foreign exchange management act and follow the SEBI regulations.

The move is aimed at helping the market regulator in regulating and maintaining reporting of NRIs, assisting NRIs to invest through FPI in a regulated regime.

Also read: SEBI Allows Foreign Entities In Commodity Derivatives Market

Last month, the panel had suggested changes on several contentious proposals and more time for compliance bringing relief to foreign investors worried over new KYC and beneficiary ownership norms.

It had favoured doing away with additional know your client documentation requirements for beneficial owners in case of government-related FPIs.

Besides, the panel had suggested giving six months to FPIs for compliance to new rules after they're finalised, while the non-compliant investors can be given further 180 days to wind down their existing positions.

The markets watchdog last month revised KYC norms for foreign portfolio investors, wherein resident as well as non-resident Indians have been permitted to hold non-controlling stake in such entities, based on the Khan panel's suggestions.

Also read: SEBI Issues Revised KYC Norms For Foreign Portfolio Investors

NRIs, OCIs and resident Indians have been permitted to hold non-controlling stake in FPIs. There would also be no restriction on them to manage non-investing FPIs SEBI-registered offshore funds as well as registered investment managers, according to the regulator.

These entities would be allowed to be constituents of FPIs subject to certain conditions. If single and aggregate NRI/OCI/RI holding is below 25 percent and 50 percent, respectively, of the assets under management in the FPI, then such entities would be permitted to be constituents of the FPI.