Calpers, RIL, Infosys on panel to harmonise FII inflows

Jumbo panel includes three joint secretaries, top FIIs and officials from RBI and Sebi

The new panel on foreign investments has increased in size and profile, with top names joining the crucial exercise that could determine the nature and method of foreign investment flow into the country.

Giant California pension fund CalPers and India’s largest listed firms, Reliance Industries, and Infosys Technologies are part of a jumbo panel headed by former Cabinet Secretary K M Chandrasekhar to review foreign investments in the country. CalPers, short for California Public Employees Retirement System, is the largest pension fund in the US and manages $110 billion in assets.

“The panel has expanded in size and its profile has been lifted by inclusion of these big names. The agenda is likely to be more comprehensive,” said a ministry official familiar with the development. Business Standard first reported the formation of such a panel in November.
 

STREAMLINING IS KEY

• Former Cabinet Secretary K M Chandrasekhar will head the panel of over 20 members
• In October, Sebi decided to take steps to implement the recommendations of the Working Group on Foreign Investment in India (WGFII)
• WGFII had recommended a single window policy for foreign investments, melting all the existing routes into one
• But, the FinMin in January took the opposite step of opening an additional route called qualified foreign investors
• The changes in North Block seem to have brought the WGFII report back into focus
• The new Sebi panel will help draft guidelines and set the road map for the implementation of the various proposals made by WGFII
• The move would result in more transparency and simplify the process for foreign investors

The new panel, that now has over twenty members, is likely to include three joint secretaries from the finance ministry, top foreign institutional investors, such as Citibank and Deutsche, members from exchanges and depositories as well as legal and accounting experts, the official said.

Joint secretary (capital markets), joint secretary (revenue) and joint secretary (financial services), Reserve Bank of India (RBI) and Securities and Exchange Board of India (Sebi) representatives are likely to be part of the panel.

In its board meeting in October, Sebi decided to take steps to implement the recommendations of the Working Group on Foreign Investment in India (WGFII). Itself an expert group headed by the then UTI MF chief and incumbent Sebi chairman U K Sinha, WGFII had given its report in July 2010.

While WGFII had recommended a single window policy for foreign investments, melting all the existing routes into one, the finance ministry in January took the opposite step of opening an additional route called qualified foreign investors (QFIs).

While this route has not gained much traction despite international marketing and local hardsell by the finance ministry, the changes in North Block seem to have brought the WGFII report back into focus.

The new Sebi panel will help draft guidelines and set the road map for the implementation of the various proposals made by WGFII. WGFII had recommended dissolution of various categories of investors such as FDI, FII, FVCI and NRI into a single window, called QFI (not to be confused with the current QFI), for portfolio investments in India.

The board meeting agenda published by Sebi showed the regulator received suggestions to look into regulations governing each of the investment modes, to make these seamless “while preserving precautionary features from the risk management perspective”.

The report had laid down guidelines for uniform treatment and recommended not to distinguish between foreign investors. The move would result in more transparency and simplify the process for foreign investors, it said.

The committee had argued that having multiple classes was causing regulatory overlap and was also creating uncertainties among foreign investors. While FDI falls under the Department of Industrial Policy and Promotion, FIIs and FVCI investments were regulated by Sebi. RBI also monitors all these flows and limits as they have implications on forex reserves.

However, experts say bringing all the categories under a single umbrella could pose operational challenges and could clash with regulatory requirements like KYC and investment limits.