Finance Minister in the maiden Budget 2019 speech proposed the merger of investments made thorough NRI portfolio route with the foreign portfolio investment. The move will usher the single regime for foreign investors and regulate investments and funds brought in by the non-resident Indians and person of Indian Origin.
"Merger of NRI and FPI route is a very progressive move and is the adoption of one of the key recommendations of H R Khan committee. This should help bringing much larger pools of NRI capital through pooled and professionally managed structures. The cap on NRI participation through the FPI route had received serious push back from global fund managers and this proposal should be received by the investment managers very positively. The key to this merger of PIS and FPI route will be how seamlessly this is accomplished. First. transition of control on PIS regime from RBI to Sebi would require the two regulators to work in tandem to ensure a smooth transition", said Siddharth Shah, Partner, Khaitan & Co.
Earlier in the year, SEBI came out with the rules for the merger and also exempted both housing finance and non-banking financial companies. From now, none of them will have to disclose the rise and fall in the shareholding due to encumbrance or release of encumbered shares.
FULL COVERAGE: Union Budget 2019
Currently, only the scheduled commercial banks and public financial institutions are exempted from disclosures.
The Securities and Exchange Board of India said if single and aggregate NRI/OCI holdings in assets under management of FPIs are below 25% and 50%, respectively, then such persons will be allowed to be constituents of the FPI.
In case of breach, the FPI will need to comply within 90 days and in case it remains non-compliant even after 90 days, no fresh purchases will be permitted and such FPIs will have to liquidate their existing position in the Indian securities market within 180 days.
Edited By: Udit Verma