The Securities and Exchange Board of India (hereinafter referred to as the “SEBI”) has been established with the objective of protecting the interests of investors in securities and promoting the development and regulation of the securities market.
One of the modes of Investment in India is through Foreign Portfolio Investment (hereinafter referred to as “FPI”). These investments are highly liquid and indicate the indirect control of the investor in the management. The Foreign Exchange Management Act 2000 describes Foreign Portfolio Investment as buying and selling of shares, convertible debentures of Indian companies, and units of domestic mutual funds at any of the Indian stock exchanges. The FPI in India are regulated by and regulated by SEBI (Foreign Portfolio Investors) Regulations, 2014.
With latest diplomatic strategies, the Government aims to attract more FPI in the country. On December 28, 2017, SEBI brought about modifications easing the Access Norms for Investment by Foreign Portfolio Investors, a few of which are stated below:
- Simplification of procedural requirements for FPIs.
- Exemption from seeking prior approval from SEBI in case of change in local custodian/ Designated Depository Participant (DDP) of FPI.
- Exemption to FPIs having Multiple Investment Managers (MIM) structure from seeking prior approval from SEBI in case there is Free of Cost transfer of assets.
- Simplification of process for addition of share class through FPIs.
- Permitting appropriately regulated Private Banks/ Merchant Banks to invest on their own behalf and also on behalf of their clients.
- Permitting broad based funds to regain the status in three months.
- Permitting conditional registration to existing funds dedicated to India.
Based on the above framework, SEBI intends to carry out necessary amendments to SEBI (Foreign Portfolio Investors) Regulations, 2014.
The FPI is advantageous to India in several ways including allowance of capital inflow, provision of non-debt creating source of foreign investment, reduction of foreign exchange cap and acting as a supplement the domestic savings. By the new policies the SEBI is working towards luring and securing more FPI with a view to boast the Indian economy by facilitating such capital source.