(I) Scheme for Investment by Qualified Foreign Investors (QFI) in equity shares
This Circular permits QFI (non-resident investors, other than SEBI-registered FII and SEBI-registered FVCI, who meet the KYC requirements of SEBI), from jurisdictions which are FATF compliant and with which SEBI has signed MOUs under the IOSCO framework, to purchase on repatriation basis equity shares of Indian companies, subject the following terms and conditions. Some of the important terms and conditions are:
(i) QFI can invest through SEBI-registered Depository Participants (DP) only:
(a) In equity shares of listed Indian companies through recognised brokers on recognised stock exchanges in India
(b) In equity shares of Indian companies which are offered to public in India in terms of the relevant and applicable SEBI guidelines/regulations.
(ii) QFI can also acquire equity shares by way of rights shares, bonus shares or equity shares on account of stock split/consolidation or equity shares on account of amalgamation, demerger or such corporate actions.
(iii) QFI are allowed to sell the equity shares so acquired by way of sale:
(a) Through recognised brokers on recognised stock exchanges in India; or
(b) In an open offer in accordance with the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011; or
(c) In an open offer in accordance with the SEBI (Delisting of Securities) Guidelines, 2009; or
(d) Through buyback of shares by a listed Indian company in accordance with the SEBI (Buyback) Regulations, 1998.
(iv) A separate single rupee pool bank account must be maintained by the DP with an AD Category-I bank in India for QFI investments under this scheme.
(v) The individual and aggregate investment limits for the QFI will be 5% and 10%, respectively of the paid-up capital of an Indian company. These limits shall be over and above the FII and NRI investment ceilings prescribed under the Portfolio Investment Scheme for foreign investment in India. However, wherever there are composite sectoral caps under the extant FDI policy, these limits for QFI investment in equity shares shall also be within such overall FDI sectoral caps.
(vi) QFI can remit foreign inward remittance through normal banking channel in any permitted currency (freely convertible) directly into single rupee pool bank account of the DP maintained with AD Category-I bank. Similarly, sale proceeds/dividends of equity shares will also be received in this single rupee pool bank account of the DP and must be repatriated to the designated overseas bank account of the QFI within five working days (including the date of credit of funds to the single rupee pool bank account by way of sale of equity shares) of having been received in the single rupee pool bank account of the DP, provided it is not reinvested within this period of five days.
(vii) Pricing of all eligible transactions and investment in all eligible instruments by QFI must be in accordance with the relevant and applicable SEBI guidelines only.
(II) Scheme for Investment by Qualified Foreign Investors in Rupee Denominated Units of Domestic Mutual Funds
This Circular has modified the Scheme for QFI investment in rupee denominated units of Domestic Mutual Funds under the Direct Route as follows:
1. The time period for which funds (by way of foreign inward remittance as well as by way of credit of redemption proceeds of the units of Domestic Mutual Funds) can be kept in the single rupee pool bank account of the DP under the scheme is five working days (including the day of credit of funds received).
2. Similarly, dividend received by QFI in the single rupee pool bank account must be remitted to the designated overseas bank accounts of the QFI within five working days (including the day of credit of such funds to the single rupee pool bank account). Dividend so received can be also utilised by the QFI, within these five working days, for fresh purchases of units of Domestic Mutual Funds under this scheme.
