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Sebi removes broad-based criteria for FPIs, eases KYC norms

Sebi decided that the FPIs will be re-categorised into 2 categories instead of 3 currently.

Updated: Aug 21, 2019, 08.57 PM IST
Sebi on Wednesday approved several recommendations made by the HR Khan Committee to simplify and rationalise the existing regulatory framework for foreign portfolio investors (FPIs) by easing operational constraints and compliance requirements.

The Sebi decisions came at a time when the domestic market has been witnessing strong foreign outflows, which exceeded Rs 21,000 crore during July and August.

The board of the markets regulator on Wednesday decided to do away with the broadbased eligibility criteria for FPIs. At present, for a fund to be categorised as broadbased, it needs to have at least 200 investors.

Meanwhile, the eligibility categories for FPIs have been reduced to two from three at present. Accordingly, FPIs will now be recategorised into two classes instead of three at present.

Sebi also simplified documentation requirements for KYC and also the structure for registration for multiple investment managers (MI).

Sebi said central banks that are not members of BIS (Bank of International Settlement) will be eligible for FPI registration.

In another move, Sebi said entities established in the IFSC (International Financial Services Centre) would be deemed to have met the jurisdiction criteria for FPIs. This is expected to be a big booster for the financial centre in the GIFT City.

FPIs will also be permitted to carry out off-market transfer of unlisted securities to a domestic of foreign investors. Offshore funds floated by Indian mutual funds will now be permitted to invest in India after obtaining FPI registration. The requirements for issuance and subscription of offshore derivative instruments (ODIs) have been rationalised.

Separately, Sebi tweaked the buyback norms for companies that have non-banking finance companies and housing finance companies as their subsidiaries.

The Sebi also decided to give flexibility to the mutual funds to invest in unlisted non-convertible debentures up to a maximum limit of 10 per cent of the debt portfolios of the scheme.

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RBI fines 4 bank, including PNB for violation of KYC norms

RBI fines HDFC Bank Rs 1 crore for violation of KYC norms

Domestic custodians oppose Khan panel’s stand on KYC norm

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