NEW DELHI: It is going to be tough for the foreign institutional Investors from 25 destinations including Mauritiusritus and China, as the finance ministry has come up with stricter KYC norms for such investors and has restricted beneficial ownership of NRIs and person of Indian origins to 10 per cent.
“The latest mandate prescribes that all the investment including those from sovereign funds, if they are coming from these 25 high risk jurisdictions, will have to comply with the additional documentation requirement, have to reveal more information and have to follow stricter norms. Also no NRI or PIO can own more than 10 per cent in foreign portfolio investor (FPI) for these high-risk jurisdictions. The move is aimed at the round tripping of fund,” a senior official from finance ministry told TNIE.
If sources are to be believed, fund houses are very jittery post this investment and they say that it is not just Mauritius and Cayman Island, but even China, Saudi Arabia, Thailand, Malaysia, Philippines and Indonesia figures in the list.
“This is bizarre. There are many Indians who can legitimately own fund houses in these countries, considering sizeable diaspora. I think government is overdoing it. This will result in more outflow of funds. We may see a sharper pullback in coming months,” a senior executive from Morgan Stanley said.
Even those countries which are not in the list of high risk jurisdiction, no NRI or PIO can own more than 25 per cent in an FPI.
However, the government is planning to go a step further and will match any possible connection with its own list of economic offender, high risk HNIs and possible economic offender to see if there is a link and that can help them in curbing round tripping of funds in a more efficient way.
The tightening of regulations comes after the Finance Ministry has red-flagged many off-shore funds as vehicle for money laundering.
After stricter KYC norms for foreign investors from 25 high risk destination, including China, and restricting beneficial ownership of NRIs and person of Indian origins to 10 per cent from such zones, the government will further tighten the norms, which it claims to stop the round-tripping of fund.