Indian Economy
New Norms for FPI
- 22 Aug 2019
- 2 min read
Recently, the Securities and Exchange Board of India (SEBI) has released new norms that sought to simplify the compliance and operational requirements for Foreign Portfolio Investors (FPIs).
- The norms are issued to check the outflows of FPIs as the shares worth over Rs 22,000 crore were sold in July and August 2019.
- FPIs have been withdrawing from Indian equities after the government introduced higher tax surcharge on the super-rich in the Budget 2019.
- FPI regulations have been redrafted based on the recommendation of H R Khan committee.
- Revised regulations:
- Removed broad-based criteria: SEBI decided to do away with the requirement that every FPI should have at least 20 investors.
- Simplification of the KYC ( Know-Your-Customer) document requirement for overseas investors.
- SEBI has also allowed central banks of countries that are not members of Bank for International Settlement (BIS) to register as FPIs in India.
- According to SEBI, such entities are relatively long term, low-risk investors as they are directly/indirectly managed by the government.
- FPIs shall be permitted for off-market transfer of securities which are unlisted, or illiquid, to a domestic or foreign investor.
- Sebi has also permitted offshore funds floated by Indian asset management companies to register themselves as FPIs and invest in Indian markets.
- Sebi has decided that FPIs may be re-categorized into two categories - Categories I and II - instead of the present requirement of three categories.
- Sebi removed the concept of Category-III FPIs.
These changes will make the regulatory framework more investor-friendly
- Apart from changes in FPIs regulations, SEBI has amended the Prohibition of Insider Trading regulations to include a clause to reward whistle-blowers.
