A Securities and Exchange Board of India (SEBI)-appointed panel, on Wednesday, recommended merging of existing foreign institutional investors (FIIs), sub-accounts and qualified foreign investors (QFIs) into a new investor class, Foreign Portfolio Investor (FPI).

The K. M. Chandrasekhar Committee on Rationalisation of Investment Routes and Monitoring of Foreign Portfolio Investments, in its draft guidelines, suggested that the aggregate investment limit for FPIs should be 24 per cent, being the present default aggregate limit for FIIs, which could be raised by the company up to the sectoral cap.

The committee also recommended that prior direct registration of FIIs and sub-accounts with SEBI should be done away with. Instead, FPIs should be able to register themselves with and transact through the designated depository participants (DDPs). It also called for simplified know your customer (KYC) norms to make it more customer-friendly for foreign investors.

The committee said that “in view of the special nature of the investments” from non-resident Indians (NRIs) and foreign venture capital investors (FVCIs), it was desirable to continue with these two classes for the present: NRIs to continue to have individual investment limit of 5 per cent and aggregate investment limit of 10 per cent.

In the case FVCI, the panel felt that the present list of nine sectors would be considerably expanded. Alternately, it said, a negative list could be announced by the Centre so that the rest of the sectors were opened for VCF activity.Portfolio investments to be defined as investment by any single investor or investor group, which shall not exceed 10 per cent of the equity of an Indian company. Any investment beyond this threshold shall be considered as foreign direct investment (FDI). The committee has also dealt with migration of FPI into FDI, and situations where FDI investments fall below 10 per cent.

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