GoI Allows QFIs To Directly Invest In Indian Capital Market

In an attempt to attract more foreign funds and to deepen the Indian capital market, the GoI has decided to allow Qualified Foreign Investors to directly invest in Indian equity market. This move will allow individual foreign investors direct access to the Indian equity market.

So far, QFIs were permitted to invest only through mutal fund schemes. Details norms will be issued by SEBi over the next two weeks.

According to the press release:

The QFIs shall include individuals, groups or associations, resident in a foreign country which is compliant with FATF () and that is a signatory to International Organization of Securities Commissions' (IOSCO) multilateral MoU. QFIs do not include FII/sub-accounts.

Salient Features of the Scheme:

· RBI would grant general permission to QFIs for investment under Portfolio Investment Scheme (PIS) route similar to FIIs.
· The individual and aggregate investment limit for QFIs shall be 5% and 10% respectively of the paid up capital of Indian company. These limits shall be over and above the FII and NRI investment ceilings prescribed under the PIS route for foreign investment in India.
· QFIs shall be allowed to invest through SEBI registered Qualified Depository Participant (DP). A QFI shall open only one demat account and a trading account with any of the qualified DP. The QFI shall make purchase and sale of equities through that DP only.
· DP shall ensure that QFIs meet all KYC and other regulatory requirements, as per the relevant regulations issued by SEBI from time to time. QFIs shall remit money through normal banking channel in any permitted currency (freely convertible) directly to the single rupee pool bank account of the DP maintained with a designated AD category - I bank. Upon receipt of instructions from QFI, DP shall carry out the transactions (purchase/sale of equity).
· DP shall be responsible for deduction of applicable tax at source out of the redemption proceeds before making redemption payments to QFIs.
· Risk management, margins and taxation on such trades by QFIs may be on lines similar to the facility available to the other investors.

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