Finance minister P Chidambaram has made it clear that he wants to attract more foreign investment to stock markets. He said the government would open further avenues for foreign investment apart from simplifying the procedures, including those related to KYC.
?SEBI will simplify the procedure for the foreign portfolio investors and prescribe uniform registration and other norms by converging the different know your customer (KYC) norms,? he said while presenting the Union Budget for 2013-14.
He also said depository participants would be allowed to register different classes of portfolio investors provided they comply with the KYC guidelines.The Securities and Exchange Board of India (SEBI) will soon prescribe requirements for angel investor pools by which they can be recognised as category I venture funds.
The finance minister has also allowed foreign institutional investors (FIIs) to participate in the exchange-traded currency derivatives segment. Their limit would be to the extent of their Indian rupee exposure in the country. Though exchange-traded currency derivatives were launched in 2008, regulatory concerns kept FIIs out of the segment. The segment is regulated by a joint committee of SEBI and RBI members.
He has also allowed FIIs to use their investments in corporate bonds and government securities as collateral to meet their margin requirements. Incidentally, FIIs have invested more than $8 billion in Indian equities in 2013, following it up with last year’s $24.5 billion.
The FM also intends to remove the ambiguity over the definition of foreign direct investment (FDI) and FII. ?I propose to follow the international practice and lay down a broad principle that where an investor has a stake of 10% or less in a company, it will be treated as FII, and where an investor has a stake of more than 10%, it will be treated as FDI. A committee will be constituted to examine the application of the principle and to work out the details expeditiously,? he said.
The FM also said there is a proposal under consideration to further strengthen the SEBI Act. ?I believe that India’s capital market is among the best regulated markets. This year is Sebi’s silver jubilee year and I offer the regulator our congratulations. A proposal to amend the SEBI Act to strengthen the regulator is under consideration,? he said. SEBI had last sought amendments to the securities laws in 2009 and had sent its recommendations to the finance ministry. However, the ministry later informed it that SEBI should pursue only critical amendments for the time being, as the government had set up a Financial Sector Legislative Reforms Commission (FSLRC) .By way of amendment in the SEBI Act, the market regulator has already sought a major overhaul of the securities laws, including greater authority to nail manipulators by way of powers to conduct ‘search and seizure’ operations and to demand information from any person in relation to its probes.
