There’s a better way

Earlier the Securities and Exchange Board of India had warned FIIs that they must be ready to furnish information about their PN clients, as and when the regulator requires it. More of this may follow. However, if the entry conditions in Indian markets were made easier, instead of money coming through PNs it would come through registered bodies. There is enough foreign money in New York State Exchange but it does not flow through PNs because the market is more easily accessible to foreign investors. This has neither weakened regulation nor led to market manipulation.When we do not allow simple and clean options for those investing in India, investors find round about and non-transparent ways of entering the market. This poses risks for the market.

The way to better regulation then is to make the Indian market directly accessible. The government should make the PN route unattractive and unnecessary, by removing restrictions on equity transactions in India.