NEW DELHI: Following recommendations of the Khan Committee on Foreign Portfolio Investor norms, the Securities and Exchanges Board of India (SEBI) on Friday issued revised KYC norms allowing resident as well as non-resident Indians to hold non-controlling stakes in such entities.
The revision follows widespread fears from several quarters that the earlier norms would lead to overseas funds exiting the Indian market. The outcry saw a panel formed under former Reserve Bank of India (RBI) Deputy Governor H R Khan make a series of recommendations early this month to ease earlier norms.
SEBI has now issued two circulars pertaining to KYC (Know Your Client) requirements and eligibility conditions for FPIs, where it allows NRIs, OCIs (Overseas Citizens of India) and RIs (Resident Indians) to hold non-controlling stakes in FPIs with no restriction on them managing non-investing FPIs, SEBI-registered offshore funds as well as registered investment managers.
If single and aggregate NRI/OCI/RI holding is below 25 per cent and 50 per cent, respectively, of the assets under management in the FPI, then such entities would be permitted to be constituents of the FPI. This is in line with the Khan Committee recommendations.
Meanwhile, SEBI also states that FPIs can be controlled by Investment Managers (IMs) which are “controlled and/or owned by NRI, OCI, or RI”. The conditions include that the investment manager is appropriately regulated in its home jurisdiction and registers itself with SEBI as non-investing FPI.
However, the “restriction that NRI/ OCI/ RI should not be in control of FPI shall also not apply to FPIs that are “offshore funds for which no-objection certificate have been provided by the board in terms of mutual fund regulations,” SEBI said.
Existing FPIs and new applicants will now also be given two years from the date of the new norms coming into force or date of registration, whichever is later. In case of temporary breach, a time period of 90 days would be given to ensure compliance.