Markets regulator Securities and Exchange Board of India (Sebi) is stepping up efforts to ease the onboarding of foreign portfolio investors (FPIs) and has constituted a cell for consultations with offshore investors and custodians, said whole-time member Ananth Narayan.
Sebi is also working to make regulations more “light-touch” for FPIs that invest exclusively in government securities or are sovereign funds.
The regulator is trying to make the registration process easier for such FPIs, the Sebi official said at the CII Financing 3.0 Summit in Mumbai.
These initiatives come at a time when Indian bonds are being included in global indices, helping draw new investors.
“We trust them because they are regulated, and we know what they are doing.
"For these kinds of FPIs where we believe we don't require much information, we are looking at ways to make life easier for people who have transparent funds.
"For example, using an FPI licence, is it possible to do many other things besides just investing in some listed space?
"Can we review the KYC periodicity and make life a lot more relaxed in terms of having to make disclosures,” said Narayan.
Further, if an existing FPI investment manager is setting up a new FPI, they might not need to go through the entire application process again.
Sebi is also developing a tracker for FPIs to monitor the status of their applications or the stage where it is stuck.
Narayan said Sebi had formed an FPI Cell to conduct outreach programmes on regulatory matters.
This cell also works as a one-stop solution for FPIs facing issues with registration or other processes.
So far, the cell has reached out to more than 500 FPIs and consulted with 17 custodians.
“One of the feedbacks we keep getting are signatures, and a lot of papers going across the globe.
"For such FPIs where there is trust, is there a way we can do away with wet signatures and papers flowing up and down by using things like ‘Swift’ in a manner which is still compliant with local legal requirements.
"There are a whole bunch of things we are trying to do,” said Narayan.
Sebi has formed an industry standards forum with the help of designated depository participants and custodians to consult on and implement regulatory principles and set standards of dos and don’ts.
Narayan said FPIs would be able to access funds on the day of settlement (T+1) starting from September 9.
He said the process remained smooth till now and that the ecosystem had not seen any problems in settlement.
On concerns of an increase in charges from custodians, Narayan said: “The less we have of hidden charges, more transparent charges, it would be good for everybody.
"Would there be an increase in custodian charges because of this change? Sure.
"So far like in brokerage, custodian charges have been close to zero, there is no such thing as a free lunch.
"Convert what is considered implicit opaque charge into transparent charge.”
Narayan said the regulator plans to include offshore derivative instruments (P-Notes) and FPIs with segregated portfolios under the mandate of granular disclosures on economic interest and beneficial ownership.
The regulator had floated a consultation paper on this topic on August 6.
There have been over 3,300 feedback received on the proposals, the official said.
