The Securities and Exchange Board of India (SEBI) is planning to make major changes in the disclosure rules for foreign portfolio investors (FPIs) in India. The new norms could have a significant impact on the FPIs and the Indian capital market.
What are FPIs?
FPIs stands for Foreign Portfolio Investment. FPIs are entities that invest in Indian securities such as stocks, bonds, and derivatives. They are an important source of capital for the Indian economy, as they bring in foreign exchange, liquidity, and diversification. As of March 2021, FPIs held assets worth over Rs 40 lakh crore in the Indian market, accounting for about 20% of the total market capitalisation.
What are the SEBI new norms?
According to media reports, Sebi is considering to ask FPIs to provide detailed information on their beneficial ownership, which is the ultimate owner or controller of the funds. This is to prevent money laundering, tax evasion, and market manipulation by FPIs.
The new norms may require FPIs to disclose the name, address, nationality, tax residency, and percentage of ownership of their beneficial owners. They may also have to provide the identity of the persons who exercise control or influence over the investment decisions of the FPIs.
How will it Impact FPIs?
The new norms may have some challenges and costs for FPIs, as they may have to restructure their entities, disclose sensitive information, and face higher compliance costs. Some FPIs may also lose their eligibility to invest in India if they fail to meet the criteria set by Sebi.
However, the new norms may also have some benefits for FPIs, as they may enhance their credibility, transparency, and governance in the Indian market. They may also help them to avoid any regulatory action or penalty by Sebi in case of any violation or misuse of funds.
How will it Impact the Indian market?
The new norms may also have an impact on the Indian capital market, as they may affect the inflow and outflow of foreign funds. The market may witness some volatility and uncertainty in the short term, as FPIs may adjust to the new rules and re-evaluate their investment strategies.
However, in the long term, the new norms may benefit the Indian market, as they may improve the transparency and accountability of FPIs and their activities. They may also help Sebi to monitor and regulate FPIs more effectively and protect the interests of the domestic investors and the economy.
Read Webstory: SEBI FPI Norms
The bottom line
The new Sebi FPI norms are a significant regulation that aims to improve the transparency and accountability of foreign investors in India. They may have some challenges and costs for FPIs, but they may also benefit the Indian capital market and the investors. The new norms are expected to be announced soon by Sebi, and FPIs should be prepared to comply with them.
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