FinMin seeks MEA opinion on Habib Bank entry as FII

The Finance Ministry has asked External Affairs Ministry's comments on allowing a subsidiary of the Pakistan-based Habib Bank to register as a Foreign Institutional Investor (FII) in the country, keeping national security issues in mind.     

In a communication to MEA, the Finance Ministry said whether Habib Bank AG Zurich can be permitted to register as an FII, given inputs by Intelligence Bureau (IB) regarding the antecedents of the entity, sources said.     

The Finance Ministry sought the advice, while clarifying that there is no contradiction between regulations under Foreign Exchange Management Act and those of market regulator SEBI on FIIs, the sources said.     

It is believed that Ministry of External Affairs in its earlier letter to the Finance Ministry had raised the issue of apparent contradictions in this regard.     

Explaining the issue, the Finance Ministry said there is no discrimination under FEMA based on the origin of FII. SEBI FII Regulation is in line with the FEMA Regulation.     

At present, a foreign individual cannot become an FII, and as such a Pakistani individual citizen also cannot become an FII, the communication said.     

So far as FDI regime is concerned, a Pakistani citizen or entity cannot buy Indian shares.   
  
The master circular of RBI on Foreign Investment in India talks about general permission to a resident outside India other than a citizen of Pakistan to invest in Indian shares.      

That means a Pakistani citizen or entity cannot buy Indian shares. This is in line with provisions of Foreign Exchange Management Regulations, 2000, the Finance Ministry said.