Sebi Strategy : In a move set to reshape the landscape of Indian securities market investment, the Securities and Exchange Board of India (Sebi) has put forth a visionary proposal aimed at harnessing the financial potential of Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs). Sebi’s bold proposition aims to amplify participation from NRIs and OCIs in the Indian securities market via the Foreign Portfolio Investor (FPI) route while instituting robust safeguards to counterbalance associated risks.
The current regulatory framework restricts FPI applicants from being NRIs or OCIs. However, Sebi’s innovative stance allows NRIs, OCIs, and Resident Indian Individuals (RIIs) to become constituents of the applicant after fulfilling specified conditions. This novel approach is envisioned to bolster FPI investment in India, as elucidated in Sebi’s comprehensive consultation paper.
Recognizing the concerns of potential market manipulation as previously highlighted in the Report of the Joint Committee (JPC Report), Sebi acknowledges the persisting challenges due to the proximity of individuals of Indian origin with Indian companies or promoters. Nonetheless, the proposal recognises that channelling NRI and OCI investments through FPIs, professionally managed by investment experts and safeguarded by Sebi-registered custodians, could stimulate further investments in the Indian securities market.
Under Sebi’s visionary proposal, NRIs and OCIs can significantly contribute to an FPI’s corpus, provided they are based in International Financial Services Centres (IFSCs) regulated by the International Financial Services Centres Authority (IFSCA). To ensure accountability and transparent ownership, the Securities and Exchange Board of India recommends stringent criteria for FPIs with substantial NRI or OCI ownership, thereby enhancing disclosures of stakeholders.
The Securities and Exchange Board of India introduces a tiered structure to optimize the efficacy of NRI and OCI investments via the FPI route. A single NRI or OCI’s contribution should remain below 25% of the total corpus of the applicant. Moreover, a 50% or more aggregate contribution from NRIs and OCIs is permissible under specific conditions.
Sebi Strategy & Their Proposal
Sebi’s proposal empowers FPI applicants from IFSCs to declare intentions for aggregate contributions exceeding 50% from NRIs or OCIs, aligning with the regulator’s directive. This declaration, submitted to designated depository participants (DDPs), is binding throughout the registration’s validity period.
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