Foreign capital to have easier entry norms

While there are several categories of foreign portfolio investors such as FIIs,sub-accounts,QFIs,the UK Sinha Committee had in its report in 2010 proposed a uniform treatment for all these entities.

The Finance minister proposed to smoothen the process for entry of FIIs and said that Sebi will converge the different Know Your Customer (KYC) norms and adopt a risk-based approach to make it easier for foreign investors to invest in India.

While there are several categories of foreign portfolio investors such as FIIs,sub-accounts,QFIs,the UK Sinha Committee had in its report in 2010 proposed a uniform treatment for all these entities. Taking the same in perspective,the finance minister proposed that designated depository participants,authorised by Sebi,can register different classes of portfolio investors.

The finance minister also said that Sebi will simplify the procedures and prescribe uniform registration and other norms for their entry. Sebi will converge the different KYC norms and adopt a risk-based approach to KYC to make it easier for foreign investors such as central banks,sovereign wealth funds,university funds,pension funds etc. to invest in India,” Chidambaram said.

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Market experts are of the view that these steps will make their entry easier and will be positive for the markets in the long run. Chidambaram looked to clear the ambiguity between what is FII and what is FDI. He has made it clear that all cases where an investor has a stake of up to 10 per cent in a company,will be treated as FII whereas if it is more than 10 per cent,it will be treated as FDI.

While Chidambaram also allowed FIIs to participate in the exchange traded currency derivative segment,he also permitted them to utilise their investment in corporate bonds and government securities as a collateral to meet their margin requirements thereby offering them more flexibility.

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