According to a leading business daily report, in order to have in place a uniform system for all foreign portfolio investors (FPIs), a SEBI panel is on the works to suggest a merger of the non-resident Indians (NRI) portfolio investment scheme (PIS) routes with FPIs.
At present, NRIs are allowed to invest in Indian markets via several routes directly and indirectly. The move will facilitate market watchdog SEBI to regulate NRI investments in India which is currently unregulated.
The various avenues available to NRIs for investments in India include mutual funds, private equity investments, offshore FPI and portfolio investment scheme routes. Further, they are also allowed to invest in government securities and debentures of companies in India. Besides the SEBI rules and FDI policy, such NRI investments are governed by the Foreign Exchange Management Act (FEMA).
SEBI had constituted a panel comprising custodians, chartered accountants and lawyers that is headed by former RBI deputy governor HR Khan. The draft report has been submitted by the panel in September and final report shall be presented in November with possibly major overhaul in FPI regulations.
"Merging these two routes will act as a forced diktat on NRIs to only invest through fee-based pooling vehicles like FPIs, mutual funds and alternative investment funds and not directly invest in India," Tejesh Chitlangi, senior partner at IC Universal Legal told the leading daily.
Experts say that consistency in policies is key for such a move. "Merging these two routes will act as a forced diktat on NRIs to only invest through fee-based pooling vehicles like FPIs, mutual funds and alternative investment funds and not directly invest in India," Tejesh Chitlangi, senior partner at IC Universal Legal, told the paper.
He added that this proposal by the regulator comes as a surprise as it was looking to curtail NRI participation via FPIs since the direct route was available to them.