Securities and Exchange Board of India (SEBI) formed HR Khan committee to ease the measures of Foreign Portfolio Investors (FPIs)?
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HR Khan Committee:
The committee was formed by the Securities and Exchange Board of India (SEBI) under the chairmanship of HR Khan, former deputy governor of RBI, to suggest measures about Foreign Portfolio Investors (FPIs).
Recommendations of Committee:
- NRIs, overseas citizens of India and resident Indians should be allowed to hold non-controlling stakes in FPIs and they should be allowed to manage non-investing FPIs.
- NRIs will be allowed to invest as FPIs if the single holding is under 25% and group holding under 50% in a fund, according to the panel.
- Formerly, PIOs should not be subjected to any restrictions, while clubbing of investment limits for well-regulated and publicly held FPIs having common control should be allowed.
- Time for compliance with conditions should be extended by six months, after they are finalised and also the non-compliant investors should be given further 180 days to ease their positions.
- SEBI should do away with additional Know Your Customer (KYC) requirements for beneficial owner in case of government related FPI’s.
Reforms SEBI Initiated:
- SEBI eased the KYC norms and eligibility terms for FPIs. Now the beneficial ownership criteria in the Prevention of Money Laundering (Maintenance of Records) Rules, 2005 (PMLA Rules), will apply for KYC.
- There will be separate set of norms for determining conditions, wherein NRIs, OCIs and resident Indian are constituents.
- NRIs, OCIs and resident Indians are allowed to be constituents of FPIs if a single NRI, OCI or RI holds less than 25% of holding.
- If Investment managers of NRIs, OCIs and RIs are regulated in the home jurisdiction and registered with SEBI as a non-investing FPI, they can control the FPI Such an FPI may be directly or indirectly fully-owned and controlled by an NRI, OCI, or RI.
- Securities and Exchange Board of India (SEBI) is conceiving an idea to merge Non Resident Indian (NRI) and Portfolio Investment Scheme (PIS) routes with that of Foreign Portfolio Investors (FPIs).
- Easing the regulatory framework for foreign portfolio investors, SEBI on simplified KYC requirements for them and permitted them to carry out off-market transfer of securities.
- The proposals were cleared by the SEBI board during its meeting here as part of efforts to simplify and expedite the registration process for foreign portfolio investors (FPIs).
What is FPI:
- Foreign portfolio investment (FPI) is a common way to invest in overseas economies. It includes securities and financial assets held by investors in another country.
- Stocks or American Depositary Receipts (ADRs) of companies in nations other than the investor’s nation are securities included in FPI. It also includes bonds or other debt issued by these companies or foreign governments, mutual funds, or exchange-traded funds (ETFs) that invest in overseas.
- On a macro-level, foreign portfolio investment is part of a country’s capital account and shown on its balance of payments (BOP).