Who can be a Foreign Portfolio Investor in India?

Who can be a Foreign Portfolio Investor in India?

To be considered eligible as a foreign portfolio investor, an applicant needs to satisfy the following conditions:-

1. Applicant cannot be Resident Indian (RI), Non-Resident Indian (NRI) or Overseas Citizen of India (OCI)

2. RIs, NRIs & OCIs can be constituents of FPI, subject to conditions.

3. Applicant should be resident of country whose Securities Market Regulator is signatory to IOSCO and MMOU (or Bilateral MoU with SEBI). The list can be obtained the website https://www.iosco.org/

4. Bank Applicants for FPI should be from countries whose Central Bank is signatory to BIS (else will be in Category II). List of countries whose central bank is a member of the BIS is available at the following linkhttps://www.bis.org/about/member_cb.htm

5. Central Bank of non-BIS country can apply with approval from Government of India

6. Should not be from country under FATF sanctioned list by UN Security council.

SEBI has launched a new website titled ‘India Market Access’ (www.indiamarketaccess.in), developed as a dedicated platform for current and prospective FPIs. The website is a unified initiative by India’s Market Infrastructure institutions (MIIs) -National Stock Exchange, Bombay Stock Exchange, Indian Clearing Corporation Ltd., NSE Clearing Ltd., Central Depository Services (India) Ltd. and National Securities Depository Ltd. This effort has been undertaken with the guidance of SEBI.

The website offers comprehensive, user-friendly resources, including:

i. Step-by-step guidance for new FPI registration via the Common Application Form (CAF)

ii. Advisory on required documentation for accessing Indian markets as an FPI

iii. Applicable SEBI and RBI regulations for FPIs

iv. Guidelines on taxation and repatriation procedures

v. Information on roles and responsibilities of key market participants in the FPI ecosystem.

An applicant seeking registration as a foreign portfolio investor may apply in one of the categories (Either Category-I FPI or Category-II FPI)–

"Category I foreign portfolio investor" which shall include–

a. Government and Government related investors such as central banks, sovereign wealth funds, international or multilateral organizations or agencies including entities controlled or at least 75% directly or indirectly owned by such Government and Government related investor(s);

b. Pension funds and university funds;

c. Appropriately regulated entities such as insurance or reinsurance entities, banks, asset management companies, investment managers , investment advisors, portfolio managers, broker dealers and swap dealers;

d. Entities from the Financial Action Task Force member countries, or from any country specified by the Central Government by an order or by way of an agreement or treaty with other sovereign Governments, which are I.appropriately regulated funds; II. unregulated funds whose investment manager is appropriately regulated and registered as a Category I foreign portfolio investor: Provided that the investment manager undertakes the responsibility of all the acts of commission or omission of such unregulated fund; III. university related endowments of such universities that have been in existence for more than five years;

e. An entity (a) whose investment manager is from the Financial Action Task Force member country and such an investment manager is registered as a Category I foreign portfolio investor; or (b) which is at least seventy -five per cent owned, directly or indirectly by another entity, eligible under sub-clause (ii), (iii)and (iv)of clause (a) of this regulation and such an eligible entity is from a Financial Action Task Force member country: Provided that such an investment manager or eligible entity undertakes the responsibility of all the acts of commission or omission of the applicants seeking registration under this sub-clause.

"Category II foreign portfolio investor" shall include all the investors not eligible under Category I foreign portfolio investors such as– (i) appropriately regulated funds not eligible as Category-I foreign portfolio investor; (ii) endowments and foundations; (iii) charitable organisations ; (iv) corporate bodies; (v) family offices;(vi) Individuals; (vii) appropriately regulated entities investing on behalf of their client , as per conditions specified by the Board from time to time; (viii) Unregulated funds in the form of limited partnership and trusts;

Explanation: An applicant incorporated or established in an International Financial Services Centre shall be deemed to be appropriately regulated.

The author can be reached at https://dhandasikho.online/

CA Rohit Tendulkar