The Securities and Exchange Board of India (Sebi) alone cannot decide to relax Know Your Client (KYC) norms for qualified foreign investors (QFIs), who now have direct access to Indian stock market and mutual funds, chairman U K Sinha said on Wednesday.
“It needs to be done in consultation with the government. There are certain requirements with regard to tax. The tax authorities should not feel that tax paid by QFIs is being suppressed or not captured,” he said, adding, consultation exercise with the government was on. Sinha was speaking on the sidelines of an event to inaugurate a KYC Registration Agency (KRA) by a unit of National Securities Depository Limited (NSDL).
In August 2011, Sebi had issued detailed guidelines to allow KYC-compliant foreign investors, termed QFIs, to invest in equity and debt schemes of Indian mutual fund houses. Early this month, the government allowed QFIs to directly invest in the secondary market in India.
However, stringent KYC norms such as mandatory permanent account number and tax filing details have acted as a dampener, say mutual fund executives. In a meeting with Sinha last month, MF executives had requested the regulator to relax the KYC norms for QFIs.
More KRA Agencies in offing
NSDL became the second organisation to start a KRA agency after Central Depository Services Ltd (CDSL). According to Sinha, Sebi has received two more inquires for setting up of KRAs. “I believe there will be more competition. We already have a few inquiries. However, as there will be inter-operatibility among KRAs, the clients will not face any extra difficulty,” he said.
Sinha also said Sebi was in talks with other regulators to use the uniform KYC platform for all financial products. “We are in a dialogue with them. If this system proves to be robust, then maybe other regulators can have a look at it,” he said.
