Source: The Economic Times
Context
SEBI has amended the Foreign Portfolio Investors (FPI) Regulations by replacing the existing US dollar-denominated registration fee with an Indian Rupee (INR)-denominated fee structure. The new rules will become effective after six months.
Key Changes
1. Registration Fee in INR
- Earlier: USD 2,500 for Category-I FPIs and FVCIs.
- Now: ₹2.3 lakh.
- Objective: Remove dependence on US dollar-based payments.
2. Mandatory PAN-related Information
- Applicants must provide:
- Date of Birth (Individuals), or
- Date of Incorporation (Entities)
- This will facilitate Permanent Account Number (PAN) allotment.
3. Fee Remittance by DDPs
- Designated Depository Participants (DDPs) must transfer the registration fee collected from FPIs to SEBI within 5 working days of granting registration.
Why has SEBI made this change?
- Simplifies fee collection.
- Eliminates issues arising from foreign currency transactions.
- Improves accounting and reconciliation.
- Enhances operational efficiency and transparency.
Important Terms
Foreign Portfolio Investor (FPI)
- A foreign investor investing in Indian financial assets such as shares, bonds and mutual funds.
- Regulated by SEBI.
Foreign Venture Capital Investor (FVCI)
- A foreign investor investing in Indian venture capital funds or start-up companies.
- Registered with SEBI.
Designated Depository Participant (DDP)
- SEBI-authorised intermediary responsible for processing FPI registration and compliance.
FPI vs FDI
| Basis | FPI (Foreign Portfolio Investment) | FDI (Foreign Direct Investment) |
|---|---|---|
| Meaning | Investment in financial assets like shares, bonds, mutual funds | Investment in a company to establish or control business operations |
| Purpose | Earn returns from financial markets | Long-term business expansion and control |
| Control | No management control | Significant ownership and management control |
| Investment Nature | Indirect investment | Direct investment |
| Investment Horizon | Short-term | Long-term |
