Regulatory Framework and FPI Norms
Regulatory Framework

The opening up of Foreign Direct Investment (FDI) accompanied by introduction of the new Foreign Portfolio Investment (FPI) Regulations makes India a more accessible destination amongst markets.

The FPI Regulation (2014) has considerably eased the entry norms for FPIs to access the growing Indian Capital Markets, since the introduction of the said Regulations, by SEBI on January 7, 2014, effective June 01, 2014. Over 1000 new FPIs registered with SEBI during the period June 2014 to August 2015, marking a 12% increase in the number of FPIs/ FIIs registered with SEBI.

India continues to be an attractive investment destination for global investors. With the added stability on the political front, international business houses are exploring greater opportunities. Encouraging Foreign Inflows to the secondary market has always received special focus due to the special nature of this investor segment. With SEBI's new regulations on FPIs, BSE – ICCL has considered it necessary to increase its efforts in attracting this category of investors.

Regulators

Ministry of Finance (MoF) - Government of India

The MoF is the premier policy maker with respect to, inter-alia, taxation, financial legislation and capital markets. The MoF undertakes various initiatives to facilitate investment by foreign participants in India. These initiatives broadly include ease and clarification of taxation norms, composite limit for FII + FDI investments, increasing foreign investment limits in various sectors among others.

Web link : finmin.nic.in

Securities and Exchange Board of India (SEBI)

The Securities and Exchange Board of India (SEBI) is the regulatory authority established under the SEBI Act, 1992 and is the principal regulator for Capital Markets. FPIs are required to register with SEBI in order to participate in the Indian securities markets.
Web link : www.sebi.gov.in

Reserve Bank of India (RBI)

The Reserve Bank of India (RBI) is governed by the Reserve Bank of India Act, 1934. It is responsible for implementing monetary and credit policies, issuing currency notes, being banker to the government, regulator of the banking system, manager of foreign exchange and regulator of payment & settlement systems while working towards the development of Indian financial markets. The RBI regulates financial markets and systems through different legislations. It regulates foreign exchange markets through the Foreign Exchange Management Act, 1999.

Web link : www.rbi.gov.in

Income Tax Department, Govt. of India

The Central Board of Direct Taxes (CBDT) is the apex tax administration body that functions under the Department of Revenue, Ministry of Finance and administers direct taxation in India. This department is also responsible for enforcing the Double Taxation Avoidance Agreements.

Web link : www.incometaxindia.gov.in

FPI Norms

Under the SEBI FPI Regulations, 2014, Foreign Institutional Investors (FIIs), sub accounts and Qualified Foreign Investors (QFIs) were merged into a single category, referred to as FPIs. Regulation 21 of the FPI Regulations provides a list of securities in which FPIs are permitted to access and invest. This path breaking Regulation ushers significant and positive changes in accessing the Indian Capital Markets by foreign investors.

Some of the highlights being:
  • Risk based categorization of Investors introduced
  • Documentation requirements have been eased across all categories with minimalistic requirements for categories I and II
  • Reduced Registration fees
  • Simplified KYC norms by SEBI and RBI
  • Speedier registration through Designated Depositary Participants (DDPs)
  • Investment limits enhanced for specific Investor Categories


Highlights of FPI Norms

Sr Particulars Category I Category II Category III
1 Ascertain Eligibility Criteria Govt. & Govt. related foreign investors
Intl./ Multi Lateral Org./ Agencies 		Appropriately regulated Institutions/ Persons / Broad based funds :
Non Appropriately Regulated Broad based funds whose investment manager is appropriately regulated;
University funds and pension funds;
University related endowments already registered with the SEBI as FII / sub- accounts
All other FPIs not eligible to be included in Category I &II such as Trusts, Family Offices, Individuals, Corporate Bodies
2 SEBI Fees NIL US $ 3,000 US $ 300
(For block of 3 yrs)


Investment Limits For FPI's by Instrument - Equity, Equity Derivatives, Currency Derivatives, Government Securities and Debt Instruments. Please contact a DDP, for the latest limits.

For full particulars of laws governing FPIs, please refer to the Acts/ Regulation/ Guidelines/Circulars etc. of:

SEBI - www.sebi.gov.in/sebiweb/home/list/1/3/0/0/Regulations
RBI - www.rbi.org.in/Scripts/NotificationUser.aspx

FAQs Links

SEBI has published detailed FAQs wrt FPI with a view to guide market participants on SEBI (Foreign Portfolio Investors) Regulations, 2014 ("the Regulations").
www.sebi.gov.in/cms/sebi_data/attachdocs/1416889450959.pdf