In a bid to attract more dollars into Indian financial markets, the Finance Ministry has allowed Qualified Foreign Investors (QFIs) to keep money here as long as they wish before investing in shares.
The Ministry has also decided to create a separate investment limit of $1 billion for such category of investors to put money in corporate bonds and mutual fund debt schemes. This will be apart from the $20 billion investment limit for foreign institutional investors (FIIs).
Along with QFIs and FIIs, the Government has also permitted individual investors and investor associations from the Gulf countries to invest as QFIs into the Indian equity market.
In January, the Government allowed QFIs to invest in the equity market. A QFI means an individual or an association (including trust) who meets certain norms.
Number of days
It has also been decided to do away with the restriction on the number of days that funds can be kept in the individual account of QFIs. Existing norms say that funds remitted by QFIs can be kept here for just five days. If not invested within this period, they will have to be transferred back.
Mr Thomas Mathew, Joint Secretary (Capital Market), Ministry of Finance, said that money transferred back involves transaction costs, which no investor would like to incur. The five-day restriction was proving to be a dampener for genuine investors, he said.
It has been decided to allow QFIs to open non-interest bearing rupee bank account with authorised dealer banks in India for receiving funds and making payments for transactions in securities they are eligible to invest.
From Gulf
Mr Mathew said, “We have received a lot of enquiries from big funds such as family wealth funds in Gulf countries.” The problem is that these countries, in their individual capacity, are not members of the Financial Action Task Force (FATF), but their association, the Gulf Cooperation Council (GCC) is.
The original norms for QFI clearly state that only residents and entities from FATF member-countries can come in as QFIs. Now, “residents of FATF member-countries and those from the countries of the GCC and European Commission (EC) would now be eligible to be considered as QFIs,” officials said. With this, the number of eligible countries has gone up to 45 from 34.
With all these relaxations, the Finance Ministry is going for road shows in five countries, Saudi Arabia, the UAE, Bahrain, Oman and Kuwait. The road shows will be held during June 10-15 to promote the Indian equity market.