Sebi Registration of FPIs

Context:

Sebi will ease the registration process of FPIs, which invest in Indian government bonds, or G-Secs.

Key Highlights:

• FPIs will need to comply only with RBI KYC norms and furnish PAN-related data as specified by the The Central Board of Direct Taxes (CBDT)
• Equities
  • The equities to be invested will be registered under the usual procedure of FPI registration.
• Aim
  • Sebi is trying to smoothen the bottlenecks in the process of FPI registration. As an example, for multiple investment manager structures, fields have reduced by 45%.
  • FPI trends and market dynamics reflect the selling off of Indian debt by FPIs as the yield gap between India and the U.S. has started to narrow.
• Multiple investment manager
  • Multiple investment manager structures include multi-manager portfolios, multi-manager funds, and multi-manager hedge funds: 
    • Multi-manager portfolios: These portfolios are designed to diversify risk by investing in funds from multiple managers. They can be fettered, which means they only invest in funds from the wealth or asset manager offering the portfolio, or unfettered, which means they invest in funds from third-party managers.

Threshold Limit for Granular Disclosures by foreign portfolio investors (FPIs)

• Sebi intends to raise the threshold limit of disclosures of FPIs from ₹25,000 crore to ₹50,000 crore with a hike in daily market turnover.
• Explanation
  • The proposed hike is because of a substantial rise in the market turnover on a daily basis. The new rules are meant to prevent promoters from availing of the FPI route for avoiding regulatory restrictions.
• Current framework
  • FPIs falling into any of the following categories need to give the following level of disclosures:
    • Have more than 50% of their Indian equity AUM in one Indian corporate group
    • Hold over Rs 25,000 crore of equity AUM in Indian markets
• Exemptions
  • Government-backed FPIs
  • Public retail funds
  • Exchange traded funds
  • Pooled investment vehicles
  • FPIs that are prohibited from liquidating their investments owing to statutory constraints

Foreign Portfolio Investment (FPI)