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Foreign institutional investors will be able to trade in Indian equity markets with minimal paperwork. The Securities and Exchange Board of India plans to come out with notifications to minimise the know your customer (KYC) requirement for FIIs that have established a strong track record of compliance with Indian rules.
“Last week the Government of India amended the anti-money laundering rules providing for risk based approach. Next week we are going to formulate our regulations implementing this and a large number of long-only funds will find it easier to invest in India now,” according to UK Sinha, chairman of Sebi.
Under the risk-based approach the documentation requirement for well regulated entities will be minimal. The changes are in line with the recommendations of the KM Chandrasekhar Committee on ‘Rationalisation of Investment Routes and Monitoring of Foreign Portfolio Investments,’ that were submitted to Sebi on June 12 and later accepted by Sebi board on June 25.
“The approach to KYC will be risk based. The documents needed for registration and onboarding would be the simplest for Category I and most stringent for Category III. The requirement of submitting personal identification documents such as copy of passport, photograph, etc, of the designated officials of FPIs (Foreign Portfolio Investors) belonging to Category I and Category II shall be done away with,” said the statement issued by Sebi after its board meeting on June 25.
The change in regulations comes at a time when the FII’s investments moved out of the country in large chunk.
Between July and August 2013, FII’s pulled out a net of $9.24 billion from the Indian debt market and Sinha feels that the reason for the problem in debt market is lack of diversification in the class of investors (FII’s) in debt instruments in the country. “Our medium and long term aim should be to provide a wide dispersal of clients who are investing in debt market in India from abroad,” said Sinha while speaking at Express Group’s Idea Exchange in New Delhi on Monday. “While you can’t stop people who are doing pure arbitrage, we should put in some mechanism in place to encourage long-term investors.”
Major steps to boost corporate bond market in a day or two: Sinha
Mumbai: Sebi on Tuesday said it will announce some important measures for the corporate bond market in “a couple of days”.
“Sebi is trying to provide more liquidity into the corporate bond market and one or two measures are in the pipeline to improve trading mechanism. Hopefully, in the next couple of days we will be able to announce that,” Sebi chairman UK Sinha said. PTI