Market regulator Securities and Exchange Board of India's board will take up the review of curbs imposed on participatory notes on August 13, but is unlikely to relax them, sources said.
This will be the first review meeting after the curbs were imposed on Participatory Notes last year, sources said, adding, "You don't expect the first review meeting to relax curbs."
The review of curbs on P-notes will come up around nine-and-a-half months after they were imposed by Sebi last year.
In October last, Sebi had asked foreign institutional investors and their sub-agents to wind up existing positions on P-notes in derivatives in 18 months, besides prohibiting them to issue any such fresh instruments.
It had also imposed curbs on such instruments in the spot market where FIIs are not allowed to issue P-Notes for more than 40 per cent of their assets under custody.
The reference date for calculating such assets was fixed as September 30 last year.
Those FIIs who have issued P-Notes of more than 40 per cent of their assets, could issue such instruments only if they cancel, redeem, or close their existing PNs. Those who have issued P-Notes less than 40 per cent of their assets under custody can issue additional instruments at the rate of five per cent of their assets.
By the time of imposition of the curbs, only 34 of over 1,100 FIIs were issuing participatory notes.
The exercise was aimed at strangulating flow of anonymous funds into the Indian equities market.
The Sebi had asked sub-accounts of FIIs that issue P-Notes to register as FIIs for investing in the Indian capital market. This was to make sure that all foreign funds come to the country through the front door.
Sources said, registration of FIIs is going on smoothly.
Participatory notes are the instruments through which unregistered foreign players invest in Indian securities.
