Under the Foreign Portfolio Investment (FPI) regime, Securities and Exchange Board of India (SEBI)
has harmonized foreign institutional investors (FIIs), sub-accounts
and qualified foreign investors (QFIs) regimes into a single investor
class – foreign portfolio investors (FPI) and provide a single window
clearance through designated depository participants (DDPs).
Procedure to register FPI:- An
application is to be made to the Designated Depository Participant for
registration as an FPI in the form A along with specified fee.
- SEBI
has authorized NSDL to generate the registration number and certificate
which shall be transmitted to its DDP, who will in turn issue
electronic registration certificate to the FPI applicant.
Eligibility criteria for FPI:The applicant shall have to fulfill the following conditions to be eligible register as FPI:
- The applicant should not be a person resident in India as per the Income-tax Act, 1961.
- The applicant should not be a Non Resident Indian.
- The applicant should be a resident of a country whose securities market
regulator is a signatory to International Organization of Securities
Commission’s Multilateral Memorandum of Understanding or a signatory to
bilateral Memorandum of Understanding with the Board.
- The applicant should not be a resident of a country identified in the public statement of FATF as either:
a.
Having a strategic Anti-Money Laundering or Combating the Financing of
terrorism deficiencies to which counter measures apply or
b. Has not
made sufficient progress in addressing the deficiencies or has not
committed to an action plan with FATF to address such deficiencies. - The applicant should be legally permitted to invest in securities
outside the country of its incorporation / place of business /
establishment.
- The applicant should be authorized by its MOA / AOA
/ Agreement to invest in securities on its behalf or on behalf of its
clients.
- The applicant should have sufficient experience, good
track record, should be professionally competent, financially sound and
should generally have a good reputation of fairness and integrity.
- The grant of certificate to the applicant shall be in the interest of the development of the securities market.
- If the applicant is an intermediary, he should be a fit and proper person.
- If the applicant is a bank, he should be a resident of a country whose
central bank is a member of Bank for International Settlements.
Since
NRI’s are not allowed to register as an FPI, a company which is
majority owned by one or more NRI / PIOs shall not be allowed to make
investments as an FPI. However, if such company is appropriately
regulated it may be given registration as Category II FPI for the
purpose of acting as investment manager for other FPIs. Alternately, a
fund having NRIs as its investors is also not prohibited from obtaining
registration as an FPI.
Categories of FPI:FPI may be registered in one of the following categories:
- "Category I"
shall include Government and Government related investors such as
central banks, Governmental agencies, sovereign wealth funds and
international or multilateral organizations or agencies.
- "Category II" shall include:
• Regulated broad based funds such as mutual funds, investment trusts, insurance/reinsurance companies
• Regulated persons such as banks, asset management companies, investment managers/ advisors, portfolio managers;
• Broad based funds that are not appropriately regulated but whose investment manager is appropriately regulated:
Provided
that the investment manager of such broad based fund is itself
registered as Category II FPI. Provided that the investment manager
undertakes that it shall be responsible and liable for all acts of
commission and omission of all its underlying broad based funds and
other deeds and things done by such broad based funds under these
regulations.
• University funds and pension funds; and
• University related endowments already registered with the Board as Foreign institutional investors (FII) or sub-accounts.
- "Category
III" shall include all others not eligible under Category I and II such
as endowments, charitable societies, charitable trusts, foundations,
corporate bodies, trusts, individuals and family offices.
Banking accounts:- FPI
can open a non interest bearing Special Non-Resident Rupee (“SNRR”)
account and a foreign currency account with Authorized Dealer Bank. They
can transfer sums, at the prevailing market rate, from foreign currency
account to SNRR account for making genuine investments in securities.
The Authorized Dealer Bank may transfer repatriable proceeds (after
payment of applicable taxes) from SNRR account to the foreign currency
account.