With an aim to attract foreign investors from a larger number countries to the Indian capital markets, regulator SEBI may soon sign bilateral MoUs with its counterparts in at least six countries.
At the same time, SEBI (Securities and Exchange Board of India) will request the market regulators across various countries to allow the Indian market intermediaries operating in their jurisdictions to solicit business from interested Qualified Foreign Investors (QFIs) at those places.
The steps are being taken by SEBI pursuant to suggestions made by the Ministry of Finance in this regard and would help attract more overseas investments through the QFI route, a senior official said.
The QFI framework was first put in place about a year ago and individuals, groups or associations from 45 countries, including Australia, Canada, France, Germany, Hong Kong, Japan, Singapore, Switzerland, UAE, UK and the US, are currently eligible to invest through the QFI route.
Foreign investors are allowed to invest directly through QFI route in stocks, mutual funds and corporate bonds through demat accounts opened with SEBI-registered Depository Participants, after meeting KYC (Know Your Client) norms applicable in the Indian markets.
However, the absence of an MoU (Memorandum of Understanding) between SEBI and the respective regulators in seven other countries (Argentina, Republic of Korea, Turkey, Kuwait, Qatar, Ireland and Latvia) make the entities in those jurisdictions ineligible to put money as QFIs into the Indian capital markets, the Finance Ministry had informed SEBI.
At the same time, certain restrictions imposed by SEBI’s counterparts in a number of countries make it difficult for the entities in those jurisdictions to invest in India through the QFI route, the official said.
In order to remove these bottlenecks, SEBI has decided to sign MoUs with six countries — Argentina, Turkey, Kuwait, Qatar, Ireland and Latvia.
SEBI would also seek to expedite the process in cases where it has already taken initiatives to enter into bilateral MoUs with regulators in other countries.
SEBI is of the view that a bilateral MoU might not be required with its counterpart in Republic of Korea, as it is already a member of international body FATF (Financial Action Task Force) and a signatory to global market regulators’ grouping IOSCO’s MMoU (Multilateral Memorandum of Understanding).