As domestic markets gear up for a new foreign portfolio investor (FPI) regime, the number of such investors is estimated to be around 8,700, higher than the total count of existing foreign institutional investors (FIIs) and their subaccounts.
FPI has been created as a new class for all kinds of overseas entities investing in domestic capital markets and they would subsume existing categories like FIIs and their sub-accounts.
While the Securities and Exchange Board of India (Sebi) has extended the timeline for implementation of the new FPI regime to June 1 on account of functional reasons, this new class of investors is already attracting significant interest in the market place as it has streamlined the registration and operational procedures.
FPI regulations were notified by Sebi in January and were earlier scheduled to be implemented from April 1.
The new regime divides FPIs into three categories as per their risk profile and the know-yourcustomer requirements, and other registration procedures would be much simpler for FPIs compared to current practices.
The category-I FPIs (lowestrisk category) are estimated to have nearly 40 entities, the category-II may soon have close to 8,500 investors and more than 150 are expected to be in the category-III, an official said.
The category-I FPIs include foreign governments and government-related foreign investors.
Category-II FPIs include appropriately regulated entities, broad-based funds whose investment manager is appropriately regulated, university funds, university related endowments and pension funds, etc. Category-III FPIs include all others not eligible under the first two categories.
There are over 1,700 registered FIIs and more than 6,300 sub-accounts. All FIIs and subaccounts would need to convert themselves into FIIs under the new regime after payment of certain fees while new FPIs would have to pay applicable registration charges. Under the new FPI regime, Sebi's fees income from foreign investors is also expected to rise considerably.
FPI regulations have been put in place to make an easier registration process and operating framework for overseas entities seeking to invest in the capital markets.