Sebi looking to boost participation of NRI, OCI investments in Indian securities mkt through FPI route

Sebi on Friday proposed allowing increased participation from NRIs and Overseas Citizens of India (OCIs) in the Indian securities market through the Foreign Portfolio Investor (FPI) route while putting in place adequate measures to mitigate the risks emanating from such investments.

The proposed move is aimed at boosting investment by FPIs in India, the Securities and Exchange Board of India (Sebi) said in its consultation paper.

Under the current rule, an FPI applicant cannot be a Non-resident Indian (NRI) or OCI. However, NRIs or OCIs or Resident Indian individuals (RIIs) can be constituents of the applicant after meeting the conditions specified by Sebi.

To enhance investments by FPIs in India, Sebi has proposed facilitating increased participation from NRIs and OCIs as constituents of FPIs that are based out of International Financial Services Centres (IFSCs) in the country and regulated by the International Financial Services Centres Authority (IFSCA).

Sebi has sought comments on the proposals till September 10.

The regulator said that the concerns of market manipulation by NRI or OCI-owned entities stated in the Report of the Joint Committee or JPC Report exist even today due to the possible proximity of persons of Indian origin with Indian companies or promoters.

At the same time, it also recognised that further investments in the Indian securities markets can be facilitated by channelling NRI and OCI investments into the country through FPIs that are professionally run by investment managers and whose securities are kept in safe custody by Sebi-registered custodians.

JPC Report pertains to stock market scam and matters relating.

If the aggregate contribution of NRIs/ OCIs beyond 50 per cent of the corpus of the FPI is to be permitted, Sebi has proposed that this may be made applicable only to such FPIs that are based out of IFSCs in India and regulated by the IFSCA.

Also, it has been proposed that the criteria that make an FPI liable for granular level disclosures of persons having ownership, economic interest or control in the FPI, should be made relatively stricter for such FPIs. To ensure proper identification and verification of beneficial owners (BOs) in such NRI-owned and controlled entities, Sebi has proposed that an identifier issued by the Government of India may be obtained from the BOs, in case the BO is an NRI or OCI.

For channelising NRI and OCI investments in the Indian securities markets through the FPI route, Sebi has proposed that the contribution of a single NRI or OCI should be below 25 per cent of the total contribution in the corpus of the applicant. Further, at an aggregate level, NRIs and OCIs should be allowed to contribute 50 per cent or more to the corpus of an FPI subject to certain conditions.

The regulator has recommended that FPI applicants based out of IFSCs who are desirous of having more than 50 per cent aggregate contribution from NRIs or OCIs in their corpus, may opt to do so by submitting a declaration in this regard to their designated depository participants (DDPs).

Such declaration should be submitted at the time of seeking registration or anytime during the validity of their registration. Once an FPI submits such a declaration, it should comply with the conditions throughout the validity of its registration, irrespective of the actual aggregate NRI/ OCI contribution in the corpus of the FPI.