To make Indian capital markets an easier and attractive investment destination for overseas investors, Sebi has finalised detailed regulations for 'foreign portfolio investors'.
The new norms provide an operational framework for FPIs, a new class of overseas investors that club all existing class of investors like foreign institutional investors and Qualified Foreign Investors.
According to proposed norms, which would be deliberated by Sebi Board in Mumbai on Saturday, FPIs in the lowest risk category would not have to pay any registration fees, sources said. .
The registration granted to FPIs would be of permanent nature unless suspended or cancelled by Sebi for disciplinary reasons. .
Sebi is merging different classes of investors such as FIIs, their Sub Accounts and QFIs into a new category, FPIs, to put in place a simplified and uniform set of entry norms for them.
The regulator has also classified FPIs into three categories based on their risk profile. .
The Category I FPIs are low-risk investors such as multi-lateral agencies, government and other sovereign entities, Category II include moderate risk foreign entities like banks, asset management companies, investment trusts, insurers, pension funds and university funds. .
The remaining overseas entities have been put in Category III and include relatively higher risk entities such as individual and hedge funds. .
Sources said that all existing FIIs and sub-accounts would continue to buy, sell or otherwise deal in the securities till the validity of their existing registration. .
Besides, all existing QFIs would continue to trade in securities till the period of one year.
In the meantime, QFIs may obtain FPI registration through Designated Depository Participants.
"The registration granted to FPIs by the DDPs on behalf of Sebi shall be permanent unless suspended or cancelled by the regulator," a source said.
Sebi would not charge any fees for granting registration to Category I foreign investors, while the regulator would take an annual payment of $1,000 and $100 from Category II and Category III overseas entities, respectively, till the validity of their registration.
Also, a fees of $1,000 would be paid by the existing FIIs, sub-accounts and QFIs to obtain registration certificate to act as an FPI.
The new norms are based on the report of a committee headed by former Cabinet Secretary K M Chandrasekhar and were approved by Sebi in its board meeting in June end.
Thereafter, the regulator referred the recommendations to the Government of India for implementation.
FPIs would be allowed to invest in securities in the primary and secondary markets.
These would include unit of schemes floated by domestic mutual funds, treasury bills, dated government securities, equity derivatives, commercial papers, and Indian Depository Receipts, among others.
These measures come at a time when concerns are being raised about outflows of foreign capital and weakening of the rupee against the dollar and other foreign currencies.
The new norms are expected to make it much easier for the foreign investors to enter the country and make investment decisions.