The government is considering a simple and streamlined set of norms for all kinds of overseas investments into capital markets, but wants such foreign investors to undergo a stricter scrutiny process.
The move could facilitate direct investments by both individuals and institutional entities abroad into Indian equity and debt markets, as against the current practice of coming through FIIs, venture capital and private equity funds.
However, foreign investors would need to face stringent scrutiny before being allowed to invest in the Indian capital markets according to the proposal, on which the finance ministry was seeking feedback from regulators like Sebi and RBI, sources said.
The proposals would have no bearing on FDI norms and would only apply to the portfolio investments, or those coming into the capital markets.
While flow of foreign investments into Indian markets have been robust over the past few years, a tedious and complex process has often been criticised for coming in way of the optimum level of overseas fund flow into the country.
The proposed measures, expected to be announced in the Union Budget later this month, would focus on simplifying the process of foreign investment in capital markets and avoid uncertainty, delay or unequal treatment with regard to various investor classes, sources said.