A single class of foreign investors and their permanent registration have finally become a reality.
The Securities and Exchange Board of India (Sebi) has notified new foreign portfolio investor (FPI) regulations to put in place an easier registration process and operating framework for overseas entities seeking to invest in Indian capital markets.
The new regulations, which came into effect on Tuesday, replaces the existing Sebi regulations for foreign institutional investors (FIIs) and the new class of investors, FPIs, would encompass all FIIs, their sub-accounts and qualified foreign investors (QFIs).
Under the new norms, FPIs have been divided into three categories as per their risk profile and the KYC (know your client) requirements and other registration procedures would be much simpler compared to current practices.
The Category-I FPIs, which would be the lowest risk entities, would include foreign governments and government related foreign investors.
Category-II FPIs would include appropriately regulated broad-based funds, university funds, university-related endowments and pension funds.
Category-III FPIs would include all others not eligible under the first two categories.
The regulator has also decided to grant them a permanent registration against the current practice of granting approvals for one year or five years.
They will be permanent unless suspended or cancelled by the board or surrendered by FPI. Sebi said FPIs would need to apply for registration through designated depository participants, subject to compliance with KYC norms.
"The designated depository participant shall endeavor to dispose of the application for grant of certificate of registration as soon as possible but not later than 30 days after receipt of application by the designated depository participant," Sebi said.