The move is part of a broader agenda that includes discussions on easing voluntary delisting mechanisms and introducing a regulatory framework for real estate fractional ownership platforms
The Securities and Exchange Board of India (Sebi) is reportedly considering a proposal to permit non-resident Indians (NRIs) and Overseas Citizens of India (OCIs) to increase their exposure to domestic equities. This would be facilitated through foreign portfolio investors (FPIs) registered at the GIFT City International Financial Services Centre (IFSC), as per sources cited in a report on m.rediff.com.
The proposal, scheduled for discussion during Sebi’s board meeting on December 9, aims to explore avenues for greater NRI/OCI participation in domestic equities. The move is part of a broader agenda that includes discussions on easing voluntary delisting mechanisms and introducing a regulatory framework for real estate fractional ownership platforms.
Presently, regulations restrict the combined holdings of NRIs and OCIs in a global fund to be below 50%, with a cap of 25% for a single NRI or OCI. Sources suggest that Sebi may consider allowing the aggregate contribution of NRI/OCIs to exceed 50% of the FPI corpus if the global fund is domiciled at IFSCs based in India.
The current investment cap aims to prevent Indian promoters from using the FPI route to bypass domestic regulations, such as minimum public shareholding or takeover code regulations. However, permitting greater participation through the IFSC route addresses this concern, as the KYC and due diligence framework would be regulated by the International Financial Services Centres Authority (IFSCA), a domestic regulator.
Sebi had initiated discussions on this matter in August, stating that IFSCs would have a more robust information-sharing mechanism with Sebi compared to other international regulators. This would enable more effective oversight of structures with predominant NRI/OCI ownership, aligning with prescribed principles under PMLA/PMLR and the Foreign Exchange Management Act, 1999 (FEMA).
Market experts anticipate that a more liberalized regime for NRI/OCIs could offer dual benefits by boosting the fund ecosystem at the IFSC and attracting genuine flows from overseas Indians. Presently, there are only 21 FPIs registered with the IFSCA. Sebi is expected to consider suggestions from these platforms, particularly in relation to sponsor holdings and net worth.
The upcoming board meeting will also address delisting regulations, exploring alternatives to the reverse book-building mechanism. Currently, certain products, such as venture capital schemes, restricted schemes, and portfolio management services, have no minimum investment threshold for these investors.
As per Sebi’s consultation paper, the proposed framework sets an income criterion of at least $200,000 annual gross income in the preceding financial year for individuals to qualify as accredited investors. Additionally, individuals, sole proprietorships, or one-person companies can be identified as accredited investors based on net assets, with a minimum requirement of $1 million and at least $500,000 worth of net assets comprising financial assets, excluding the primary residence value.
The IFSCA has sought comments by December 7.
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