FIIs may get automatic approval

The Reserve Bank of India (RBI), in consultation with the Securities and Exchange Board of India (Sebi), may consider automatic registration for foreign institutional investors (FIIs), albeit in a limited form initially.

Sources said over the past few months, leading FIIs have been making presentations to both the regulators for such a system as it reduces the current cumbersome documentation process.

One of the proposals, according to a foreign bank, is to allow automatic access to the Indian markets for FIIs "" except for those entities originating from countries who will be on the regulator's negative list.

Such entities will have to seek entry permission by going through the formal entry procedure.

Akil Hirani, managing partner of Maxumder & Company, said, "The FIIs are looking for automatic investment in sectors much along the lines of foreign direct investment."

He said both the regulators could have problems with this as they still wanted to keep tabs on the sources of funds flowing into the Indian markets.

This is in order to weed out suspect entities from taking exposure to Indian equities, he said.

Sebi had stipulated that FIIs and sub-accounts can issue offshore instruments such as participatory notes only to entities that are regulated somewhere and it had also issued a list of regulatory authorities recognised by it.

FII sources said that, in a similar manner, the regulator could have a negative list as well which would afford FIIs not in the list getting automatic registration.

At present the registration procedure for FIIs operates as a single window clearance through Sebi involving a number of steps.