FPI Regime simplified by the SEBI to boost foreign investments into India

In brief

The Government of India, through the Securities and Exchange Board of India (‘SEBI’), is taking measures to liberalise its current foreign portfolio investors regime as an initiative to boost foreign investments into India.

SEBI through the 2014 Foreign Portfolio Investors (‘FPI’) Regulations (‘FPI Regulations’) regulates and issues FPI licences to investing entities in India. The FPI Regulations came into effect on 01 June 2014 and several guidelines, FAQs and circulars have been issued by the SEBI to provide clarifications to foreign investors.

 

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Review of 2014 SEBI (Foreign Portfolio Investors) Regulations

In March 2018, the SEBI constituted a Working Group to review the FPI Regulations with a primary objective of consolidating the circulars, FAQs and guidelines. The intent was to simplify the language and complexities, hereby rationalising and liberalising the FPI regime.

In May 2019, the Working Group submitted its recommendations to the SEBI and a new set of FPI Regulations was later approved in August 2019. Some of the proposed measures are highlighted below:

  • Simplified and expedited registration process with ease in compliance requirements.
  • Phasing out of the broad based eligibility criteria for institutional foreign investors.
  • FPIs to be re-categorised into two categories - Category I and II, instead of the present regime of three categories.
  • Simplified registration for Multiple Investment Manager structures.
  • Central banks that are not the members of Bank for International Settlement to also be eligible for FPI registration.
  • Entities established in the International Financial Services Centre in India to be deemed to have met the jurisdiction criteria for FPIs.
  • Simplified KYC documentation requirements.
  • FPIs permitted to transfer off-market unlisted, suspended or illiquid securities to a domestic or foreign investor.
  • Offshore Funds floated by Indian Mutual Funds permitted to invest in India after obtaining registration as FPI. 
  • The requirements for issuance and subscription of Offshore Derivative Instruments have been rationalised.
     

While the recommendations have only been approved in the SEBI Board Meeting on 21 August 2019, we still await for the revised FPI Regulations which are expected to be out in the months to follow:

 

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