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Panel to review FPI diktat : SEBI
Why in the news ?
- Amid apprehensions that its April 10 circular on beneficial ownership of offshore funds could cause potential capital outflows of $75 billion,SEBI said it would review the matter and take a “holistic view”, seeking to assuage panic among investors.
- Just a day before, SEBI had issued a statement saying it is preposterous and highly irresponsible to claim that 75 billion dollars of FPI investment will move out of the country because of SEBI’s circular issued in April 2018.
More in the news
- The capital markets regulator said that a working group constituted under H.R. Khan, former RBI deputy governor, met with industry participants and would soon give its recommendations to SEBI, which would then review the entire matter.
- The ministry of finance has also been consulted on this.
- On April 10, Sebi had issued a circular on enhancing KYC norms for Foreign Portfolio Investors (FPI).
- As per these norms, resident Indians, NRIs, Persons of Indian Origin, Overseas Citizens of India cannot be beneficial owner of a fund (or FPI) investing in India.
- The April circular of the regulator had also asked FPIs to disclose name and address of the beneficial owner; whether they are acting alone or together.
- The finance ministry now said that non-resident Indians (NRIs) are permitted to invest up to 5 per cent in a single security, but they cannot simultaneously invest and manage funds.
- Stock markets fell for the fifth straight session on sustained capital outflows by foreign funds after an investor lobby group named AMRI (Asset Managers Roundtable in India) flagged the new Sebi KYC norms, if not amended, could lead to outflows of $75 billion from India, hurting the rupee and stocks.
Concept
- Foreign Portfolio Investment (FPI) is investment by non-residents in Indian securities including shares, government bonds, corporate bonds, convertible securities, infrastructure securities etc.
- The class of investors who make investment in these securities are known as Foreign Portfolio Investors.
- Any equity investment by non-residents which is less than or equal to 10% of capital in a company is portfolio investment. While above this the investment will be counted as Foreign Direct Investment (FDI).
- Foreign Portfolio Investors includes investment groups of :
-Foreign Institutional Investors (FIIs), -Qualified Foreign Investors (QFIs) and
-subaccounts.
- FII is an institution like a mutual fund, insurance company, pension fund etc.
- FII is an institution who is registered under the Securities and Exchange Board of India (Foreign Institutional Investors) Regulations, 1995.
- QFI is an individual, group or association which is a resident in a foreign country.
- The QFI should compliant with the Financial Action Task Force standard and should be a signatory to the International Organisation of Securities Commission.
Source
The Hindu, Indian Economy.