No curb on capital inflows till Jan

The government is unlikely to put fresh curbs on capital inflows before January next year, when it will assess the impact of the measures already taken by the Securities and Exchange Board of India (Sebi), a finance ministry official has said.

"We need two to three months to assess the impact. We will probably assess the situation in January at the meeting of the Sebi board," a finance ministry official told Business Standard.

"We do not have sufficient data. Participatory notes (P-notes) issued by FIIs are reported by Sebi after a one-month gap. Sebi's decision on P-notes relates to foreign institutional investors. We need to know the impact of what we have done before we take further steps," the official said.

To arrest the surge in capital inflows, Sebi had last month put some curbs on issuance of P-notes. P-notes are offshore derivative instruments that allow foreigners to invest indirectly in India's stock market.

FIIs have been net sellers since the proposal to curb P-notes was announced by Sebi on October 17. Net selling by FIIs, according to Sebi data till November 27, is Rs 7,160.5 crore. According to the Bombay Stock Exchange, FII net selling has been Rs 19,504.2 crore.

According to Sebi's new regulations, FIIs & sub-accounts will not issue or renew P-notes issued against derivatives. They have to wind up their current positions within 18 months. Further, issuance of P-notes by the sub-accounts of FIIs has been discontinued with immediate effect. They also have to wind up their position within 18 months.

Sebi has also imposed an incremental rate of 5 per cent for issue of P-notes for FIIs with less than 40 per cent of assets in P-Notes. Those with over 40 per cent of assets in P-Notes can issue the notes only against redemptions or cancellations.