What do you Understand by Foreign Portfolio Investment in India?

Foreign portfolio investment is an investment of Indian securities such as shares, government bonds, corporate bonds, convertible securities, infrastructure securities etc. by the non- resident. The investors who invest in these securities are known as Foreign Portfolio Investors in India. It has been regulated under the framework of SEBI (Securities and Exchange Board of India) Act, 1992.

Now let us try to understand this topic in detail.

What are the Classified Categories of Foreign Portfolio Investment in India?

Investors are required to be register in any of the classified categories which are described below:

·        Category I: It includes the foreign investors who are related with the government such as government agencies, central banks, sovereign wealth funds.

·        Category II: It includes the regulated bodies like the banks, assets management companies, investment manager etc. and in the case of board based funds. It may also regulate the mutual funds, investment trust, non- regulated body etc.

·        Category III: It includes those investors who are not covered under the category of I and a group of II.

What is the Procedure for Foreign Portfolio Investment (FPI) in India?

This is the following procedure for foreign investors:

Step 1: An applicant has to apply to the designated depository participant in the form an along with the fees prescribed.

Step 2: The investors, who want to invest in the Indian market, should qualify such as he or she must be the non- resident in India:

·        Its security market regulator should be a signatory to the international organization of the securities commission's multilateral memorandum of the understanding or party to an MOU with SEBI.

·        If the applicant is the bank, then the central bank should be a member of the bank for international settlements.

·        He or she should not be a resident in the country which is identified in public statement of financial action task force having issues related to terrorism or money laundering.

·        An applicant should be legally authorized to invest outside the country as per its memorandum of association and article of association or another equivalent of the securities.

Step 3: After receiving the application, the board or the designated depository participant is required informs the applicant to furnish information, clarification or even appear themselves before the committee or the identified depository participant. They can also reject the application if not satisfied with the content. Before dismissing any claim an opportunity of being heard should be given.

Step 4: If the designated depository participant is satisfied with the application, then they can grant the certificate of registration in form B of the first schedule after collecting the prescribed fees and remit to the same to the board. They can’t dispose of the application after the 30 days of the receipt which is given.

Step 5: Once the certificate has granted under these regulations, it will remain permanent unless it has been suspended or cancelled by the board or unless the applicant itself defers it.

Conclusion

By knowing all the points under foreign portfolio investment in India, we must conclude that the SEBI has given the golden opportunity to the foreign investors where they can invest in India.

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