Sebi working group proposes relaxing foreign fund rules for Non-Resident Indians

Non-resident Indian (NRI) offshore fund managers have requested the Securities and Exchange Board of India (Sebi) to allow them to own at least 5 per cent in their fund...

A working group of the Securities and Exchange Board of India (SEBI) on Saturday recommended relaxing foreign fund rules for non-resident Indians.

Indian markets were hit by uncertainty emerging from concerns over an April circular from SEBI that said foreign investment rules for companies of Indian origin had been tightened.

Non-resident Indians may be allowed to invest as foreign portfolio investment (FPI) if a single holding is under 25 percent and group holding is under 50 percent in a fund, SEBI’s working group said.

The FPI regulations were framed to attract more foreign capital into the country. Hence, these funds have been provided several incentives, including easy registration process, flexibility in terms of taxation and compliance. Indian authorities fear that allowing NRIs to invest through the FPI route could lead to round-tripping. Also, it could open arbitrage opportunities as it would encourage local money to be funnelled through the FPI route to avoid taxes.

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