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He asked the stock market regulator, the Securities and Exchange and Exchange Board of India(Sebi), to simplify their registration, especially to lower-risk ones such as those managing university or pension funds.
“Sebi will simplify the procedures and prescribe uniform registration and other norms for entry of foreign portfolio investors. Sebi will converge the different KYC(Know Your Client) norms and adopt a risk-based approach to KYC to make it easier for foreign investors such as central banks, sovereign wealth funds, university funds, pension funds etc. to invest in India,” said P. Chidambaram in his budget speech.
He also clarified on the distinction between a foreign institutional investor(FII) who invests for portfolio gains and those who come in via the Foreign Direct Investment(FDI), seen to be strategic stakeholders in the business.
“Where an investor has a stake of 10 percent or less in a company, it will be treated as FII and, where an investor has a stake of more than 10 percent, it will be treated as FDI,” he said.
He added that a committee would examine the application of this broad principle and to work out the details expeditiously.
FIIs have also been permitted to to use their corporate and Government bond holdings as collateral to meet their margin requirements.
FIIs have also been allowed to participate in the exchange traded currency derivative segment to the extent of their Indian rupee exposure in India.
Additionally, he stated that Designated depository participants, authorised by Sebi, will now be free to register different classes of foreign portfolio investors, subject to compliance with KYC guidelines.
