SEBI Backtracks on FPI Rules, To Allow NRIs and PIOs To Hold Non-controlling Stake
After facing a backlash from foreign funds' lobby group, market regulator Securities and Exchange Board (SEBI) has radically changed its course on banning non-resident Indians (NRIs) and persons of Indian origin (PIOs) from owning foreign portfolio investment (FPI) vehicle or structure. SEBI may allow NRIs and PIOs to hold 25% as a single beneficiary and up to 50% as a group in an FPI. 
 
In April this year, SEBI had banned NRIs and PIOs from being beneficial owners (BOs) of an FPI, giving them six months to make the changes.
 
The HR Khan Committee suggestions were made in response to the strong objections raised by the Asset Management Roundtable of Indian (AMRI) to the SEBI circular issued on 10 April 2018 which effectively placed a blanket ban on investments through certain FPIs. 
 
On Saturday, the Khan Committee recommended some changes in the norms in know-your-customer (KYC) guidelines for NRI and PIOs. The Committee was set up by SEBI to review the FPI rules. The Committee met last week against the backdrop of a sharp fall in market indices. The market was supposedly rattled by the new rules that would be applicable to the FPIs from December,...
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HR Khan Committee Meets To Discuss FPIs’ Contention of a Possible US$ 75 Billion Outflow
While a Times of India report mentioned on Wednesday that the Securities and Exchange Board (SEBI) has taken ‘a strong exception’ to the contention as much as $75 billion will flow out of India due to changes regulations governing foreign portfolio investors (FPI), the HR Khan Committee set up by SEBI to review the FPI rules, met against the backdrop of a sharp fall in market indices of the last few days. The market was supposedly rattled by the new rules that would be applicable to the FPIs from December, forcing them to liquidate their investments in India.
 
A group of non-resident Indians (NRIs) and offshore investment vehicles of financial services firms based in India had addressed the media a few days ago warning that as much as $75 billion worth of investments may be withdrawn from India by December 2018 if SEBI did not modify a circular that put restrictions on NRIs and people of Indian origin (PIOs) from investing via the FPI route. 
 
The circular issued on 10 April 2018 had said that NRIs, PIOs and overseas vehicles set up by Indian financial services groups cannot be ‘beneficial owners’ of FPIs. Under the Prevention of Money Laundering Act (PMLA)...
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COMMENTS

Saravanan R

2 weeks ago

Yes. Why these FPIs wait till the circular takes effect ? They were deliberately waiting for the issue to gain force as a tempest. So that Govt or SEBI can be tempered or cowed down to withdraw the circular. Congress Govt had always handled issues like this way to arm-twist the investors and then "accede" to their request ('threat'). Now industry and investors try the same trick.

Shifting to SDRs would unshackle global central banks of forex woes
It is no secret that the international monetary system is not perfect. The capital flow dynamics over the last decade stands testimony to this.
 
In response to the economic crisis of 2008, the US Federal Reserve began practicing an unconventional form of monetary policy known as quantitative easing, where the government increases money supply in the economy to stimulate the level of spending and investment. In the process, the interest rates in the economy begin to approach zero. When the US carried on with this policy for a number of years following the crisis, the dollar left the country for economies that could provide higher returns. 
 
As the Fed gave the first signs of winding down its policy of quantitative easing in 2013, the developing economies took a serious hit as US dollars began to be withdrawn. India was one of the worst affected economies due to its precarious macro-economic fundamentals at the time and found itself in the company of the 'fragile five' emerging markets - along with Brazil, South Africa, Indonesia and Turkey. By the time the Fed actually began tightening its monetary policy, India had built mechanisms to counter the capital...
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COMMENTS

Meenal Mamdani

3 weeks ago

The US will never allow that without a major fight, perhaps a global war.

That is why it maintains such a huge armed force, way beyond its immediate needs. Partly it is to feed the always hungry military-industrial complex but also partly to maintain its domination in the world of finance.

I think Trump has given a major boost to the idea of SDRs becoming the transaction of choice. Until now American policy could be anticipated as it was usually possible to determine which way it would tilt. But Trump's utter contempt for world stability and the opinions of America's allies, EU and others are looking for ways to reduce their dependence on the dollar.

May be something good will come out of the fiasco that is Trump.

REPLY

Balakumar Paramasivam

In Reply to Meenal Mamdani 3 weeks ago

Gold is the best option for the Central Banks as SDRs will make mainstream only after a collapse of the Global Monetary system or a surprise withdrawal of US from IMF. No surprises that Russia is continuously dumping the dollar and steadily building its Gold Reserves. The Russian Central banker Elvira Nabiullina is a prudent women and she has strategically buying Gold ever since she become Central banker in 2013. To fully break the US Dollar hegemony, the Saudis and Qatari's should be dumping the Petro/Gas dollars and it is unlikely to happen(with the Centcom forces stationed in Qatar). The assessment about Trump is rather harsh. The so called American allies are run by governments who have no regard to their Citizens and have remained drum beaters for Warmongering attitude of the US under the cover of Anti terrorism/ Restoring Democracy.

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