Notification No. FEMA.297/2014-RB dated 13th March 2014 – G.S.R. No. 189(E) dated 19th March 19, 2014
Foreign Portfolio Investor – investment under Portfolio Investment Scheme, Government and Corporate debt
The present scheme in respect of Portfolio Investment in India by FII & QFI has been replaced by a new scheme called the Foreign Portfolio Investment Scheme.
Important features of the said new scheme are as under: –
a. Portfolio investor registered in accordance with SEBI guidelines will now be called ‘Registered Foreign Portfolio Investor (RFPI)’. All existing portfolio investor classes, namely, FII and QFI registered with SEBI will be subsumed under RFPI. b. RFPI may purchase and sell shares and convertible debentures of Indian company through registered broker on recognized stock exchanges in India as well as purchases shares and convertible debentures which are offered to public in terms of relevant SEBI guidelines / regulations.
c. RFPI may sell shares or convertible debentures so acquired:
a) In open offer in accordance with the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011; or
b) In an open offer in accordance with the SEBI (Delisting of Equity shares) Regulations, 2009; or
c) Through buyback of shares by a listed Indian company in accordance with the SEBI (Buyback of securities) Regulations, 1998. d. RFPI may also acquire shares or convertible debentures: –
a) In any bid for, or acquisition of, securities in response to an offer for disinvestment of shares made by the Central Government or any State Government; or
b) In any transaction in securities pursuant to an agreement entered into with merchant banker in the process of market making or subscribing to unsubscribed portion of the issue in accordance with Chapter XB of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009.
e. Subject to applicable composite sectoral cap under FDI policy, RFPI investment will as under: –
a) The individual investment limits for RFPI will be below 10% of the total paid-up equity capital or 10% of the paid-up value of each series of convertible debentures issued by an Indian company; and
b) The aggregate investment limits for RFPI will be below 24% of the total paid-up equity capital or 24% of the paid-up value of each series of convertible debentures issued by an Indian company.
f. RFPI can open a Special Non-Resident Rupee (SNRR) account and a foreign currency account with a bank in India to transfer amounts from foreign currency account to SNRR account at the prevailing market rate for making genuine investments in securities. The bank can transfer repatriable proceeds (after payment of applicable taxes) from SNRR account to foreign currency account.
g. RFPI can invest in government securities and corporate debt subject to limits specified by the RBI and SEBI from time to time.
h. All investments by RFPI will be subject to the SEBI (FPI) Regulations 2014, as modified by SEBI /Government of India from time to time.
i. RFPI can trade in all exchange traded derivative contracts on the stock exchanges in India subject to the position limits as specified by SEBI from time to time.
j. RFPI can offer cash or foreign sovereign securities with AAA rating or corporate bonds or domestic Government Securities, as collateral to the recognized Stock Exchanges for their transactions in the cash as well as derivative segment of the market.
Any FII that holds a valid certificate of registration from SEBI will be deemed to be a RFPI till the expiry of the block of three years for which fees have been paid as per the Securities and Exchange Board of India (Foreign Institutional Investors) Regulations, 1995.
A QFI can continue to buy, sell or otherwise deal in securities subject to the SEBI (FPI) Regulations, 2014 for a period of one year from the date of commencement of these regulations, or until he obtains a certificate of registration as foreign portfolio investor, whichever is earlier.
All investments made by a FII/QFI in accordance with the regulations prior to registration as RFPI shall continue to be valid and taken into account for computation of aggregate limit.
A RFPI is required to report transactions to RBI as is presently being reported by FII in LEC Form.
