July 29, 2019

Securities And Exchange Board Of India Consults Centre, Begins Work To Ease Norms For Foreign Portfolio Investors

[ By Bobby Anthony ]


The Securities And Exchange Board of India is in the process of considering easier investment norms to attract foreign portfolio investors (FPIs).

FPIs and overseas funds had recently exited the Indian capital market after changes in tax proposals effectively raised surcharges for some foreign investors.

Measures being discussed include further relaxations to ‘know your customer’ (KYC) norms and easing of broad-basing requirements.

Other proposals being considered are allowing foreign funds from leading developed markets to obtain Foreign Portfolio Investment (FPI) licences in India, based on the registration certificate in their home countries.

The laws which emerge could be initially applied to investors from the US, the UK and Canada, since all these countries have strong anti-money laundering laws and are already a part the Financial Action Task Force (FATF).

Also being considered is a proposal to remove broad-basing norms for FPIs. For a fund to be categorised as broad-based, it needs to have at least 200 investors. Funds that fulfill the criteria qualify for a category-II FPI licence and have easier terms to follow than those with category-III licence.

These moves are seen as an attempt to win the trust of FPIs after the government declined to provide any relief to foreign funds affected by the increased tax surcharge.

Earlier, several industry representatives of foreign funds had met key officials at the Prime Minister’s Office (PMO) seeking relief from the increased tax surcharge.

A request had also been made to consider exempting Category-I and Category II FPIs from the ambit of the new tax surcharge, while increased tax could be levied from Category III FPIs.

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