Sebi comes bearing GIFT, moots steps to boost resident Indian participation in FPIs

The Securities and Exchange Board of India (Sebi) has proposed measures to facilitate greater participation by resident Indians in Foreign Portfolio Investors (FPIs).

In a consultation paper released on August 8, the regulator suggested allowing retail schemes based in GIFT International Financial Services Centres (IFSCs) with Indian firms to register as FPIs.

"Today, an FPI licence cannot be held by Indians because it is meant for foreigners. By that account, Indian companies in the IFSC were not allowed because they had Indian owners. Now it is clarified that if you have only foreign money you can be allowed to register as an FPI," a senior regulatory official said.

Under IFSCA rules, retail schemes must have at least 20 investors, with no single investor contributing more than 25% to a scheme, and cannot invest more than 10% of their assets in the securities of a single company. In the Indian context, they operate much like mutual funds. At present, resident Indian individuals are allowed to be constituents of an FPI only if their contribution is routed through the Liberalised Remittance Scheme (LRS) and invested in global funds whose India exposure is below 50%. They can also contribute up to 100% of the corpus in certain IFSC-based FPIs, including those structured like mutual funds.

"IFSCA has requested that, in addition to AIFs with resident Indian non-individual sponsors or managers that are already permitted to register as FPIs, retail schemes with resident Indian non-individual sponsors or managers may also be permitted to register as FPIs," Sebi said.