Indian capital markets to have 8,700 FPIs soon

As Indian markets gear up for a new Foreign Portfolio Investor (FPI) regime, the number of such investors is estimated to be around 8,700, higher than the total count of existing FIIs and their sub-accounts.

FPI has been created as a new class for all kinds of overseas entities investing in Indian capital markets and they would subsume existing categories like FIIs (Foreign Institutional Investors) and their sub-accounts.

While Sebi has extended the timeline for implementation of the new FPI regime to June 1, 2014 on account of functional reasons, this new class of investors is already attracting significant interest in the market place as it has streamlined the registration and operational procedures.

The FPI regulations were notified by Sebi in January 2014 and were earlier scheduled to be implemented from April 1.

The new regime divides FPIs into three categories as per their risk profile and the KYC (know your client) requirements and other registration procedures would be much simpler for FPIs compared to current practices.

The Category-I FPIs (lowest risk category) are estimated to have nearly 40 entities, the Category-II may soon have close to 8,500 investors and more than 150 are expected to be in the Category-III, an official said.

The Category-I FPIs include foreign governments and government related foreign investors.

Category-II FPIs include appropriately regulated entities, broad-based funds whose investment manager is appropriately regulated, university funds, university related endowments and pension funds, etc. Category-III FPIs include all others not eligible under the first two categories.

Currently, there are over 1,700 registered FIIs in the country and more than 6,300 sub-accounts. All existing FIIs and sub-accounts would need to convert themselves into FIIs under the new regime after payment of certain fees, while new FPIs would have to pay applicable registration charges.

Under the new FPI regime, Sebi's fee income from foreign investors is also expected to rise considerably.

The Foreign Portfolio Investor (FPI) regulations have been put in place to make an easier registration process and operating framework for overseas entities seeking to invest in Indian capital markets.

Sebi decided to extend the timeline for the new regime after market participants said they were still in the process of putting in place necessary systems and procedures to discharge their assigned role effectively and sought an extension.