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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