The Securities and Exchange Board of India has diluted its controversial circular issued on April 10, which laid down the KYC and ownership norms for foreign portfolio investors.
In a reversal of earlier circular, SEBI has allowed both resident and non-resident Indians (NRIs), along with overseas citizens of India (OCIs), to invest in Indian markets through the FPI route, subject to certain conditions. The earlier circular virtually barred individuals with India connection from investing or managing a foreign fund.
The regulator, however, reiterated that the KYC requirements for FPIs would have to be in line with the rules under the Prevention of Money Laundering Act (PMLA).
The development comes after the April 10 circular led to a pushback from overseas investors, particularly those with an India connection. Certain investors had even approached the prime minister’s office, seeking a rethink. The latest circular incorporates measures prescribed by the former Reserve Bank of India deputy governor H R Khan-led committee earlier this month.
Sebi has said a single NRI, OCI and resident Indian can make contribution of not more than 25 per cent in foreign fund. The aggregate contribution of these investors can be 50 per cent of an FPI. Resident Indians can contribute through the RBI’s liberalised remittance scheme (LRS), which allows an investment of $250,000 per individual in a financial year.
Sebi has said an NRI, OCI or resident Indian should not be in control of FPI.