Sebi signals more relaxations to ease onboarding of foreign investors

Sebi is considering new relaxations for foreign portfolio investors, including a common KYC system and wider use of India Digital Signature to simplify onboarding and compliance

The Securities and Exchange Board of India (Sebi) has planned a slew of further relaxations to facilitate easier registrations of foreign portfolio investors (FPIs), including a common know-your-client (KYC) and smoother documentation through India digital signature.  

 

Over the last year, the market regulator has taken several measures to make the onboarding of FPIs smoother. These include relaxations for FPIs only investing in government securities, exemptions in disclosure regime and now recently approved Swagat-FI — a single window framework for trusted FPIs such as government-owned or related funds, pension funds, and sovereign wealth funds.

 

Following the board meeting, Sebi chairman Tuhin Kanta Pandey and whole-time member Ananth Narayan G hinted at more steps under consideration by Sebi.

 

The market regulator also called for more adoption of ‘India Digital Signature’ by FPIs, which eases authorisation of legal documents.

 

The chairman said Sebi will integrate India digital signature with the common application form (CAF) for FPIs.

 

CAF is the form that FPIs need to fill for registration. Pandey said this will obliviate many documentation requirements and ease the compliance process.

 

Further, a common KYC with the banking regulator is also under discussion.

 

“Recently, the (Sebi) chairman had a meeting with the governor of the Reserve Bank of India (RBI) to smoothen the KYC process further so that there is a common KYC requirement for both banks as well as FPIs. It is particularly for FPIs where there is less risk and comfort on both sides,” said Narayan.

 

Under Swagat-FI, renewal of the eligible FPI registrations will now be done at an interval of 10 years instead of the standard 3 years. Further, they will have a one-time KYC fee of $2500 for a 10-year block instead of the three-year cycle. These FPIs will also have exemptions from the 50 per cent aggregate contribution limit applicable to non-resident Indians (NRIs) and overseas citizens of India (OCIs).

 

The Sebi officials further said that the combination of foreign venture capital investor (FVCI) and FPI registration will give a fillip to unlisted investments also.

 

Kunal Sharma, founder & managing partner, Taraksh Lawyers & Consultants, said the cross-border authentication system must work with international digital certification standards to avoid accidentally creating new barriers for foreign entities operating under different regulatory systems. 

 

He further called for clarity on tax treaty treatment for FPIs investing only in government bonds. 

 

 

Sebi now also reaches out to FPIs or the custodians if there are any issues or delays in the registration process beyond a month. Sebi officials said that there has been a surge in FPI registrations and that the regulator is tracking the time taken for processing the applications.

 

According to data on NSDL, FPIs from the US, Singapore, Luxembourg, and Ireland have the highest assets under custody in India.

 

Of the average 100 applications per month, the US accounts for the most, said Narayan.

 

In its board meeting, Sebi also approved allowing retail schemes in GIFT-IFSC with a resident Indian sponsor or manager to register as FPIs.

 

Sebi chairman added that many Singapore-based funds are now returning to India following regulatory and taxation-related clarifications. 

 

The regulator also launched a dedicated platform called India Market Access for FPIs to access regulatory updates and consolidated information relevant to them. 

Streamlining framework 

> Sebi working to ease registration process for FPIs

> Recent measures include single-window called Swagat-FI for trusted FPIs, easier registration for FPIs investing only in government-securities

> New platform called India Market Access for FPIs to seek regulatory information