Foreign portfolio investment coming in through the offshore derivative instruments (ODI) route would now be aligned with the eligibility and investment norms applicable to foreign portfolio investors (FPI).
In India, foreign investment comes in through participatory notes (P-Notes) — instruments issued by SEBI-registered FPIs to entities wishing to invest in stock markets without registering themselves. They are called ODIs as they are issued outside India.
Clarifying this, SEBI in a circular, on Monday said, “An FPI shall issue ODIs only to those subscribers which meet the eligibility criteria as laid down in Regulation 4 of the SEBI (Foreign Portfolio Investor) Regulations, 2014.”
According to Regulation 4, an FPI applicant shall not be granted registration unless the entity is the resident of a country whose securities market regulator is a signatory to the International Organisation of Securities Commission’s Multilateral Memorandum of Understanding (Appendix A Signatories) or a signatory to bilateral memorandum of understanding with SEBI.
If the applicant is a bank, it should be a resident of a country whose central bank is a member of the Bank for International Settlements. Applicants should not belong to countries which are in the negative list of nations having deficiencies with respect to anti-money laundering and combating the financing of terrorism or nations that have neither made sufficient progress in addressing these deficiencies nor committed to an action plan to address them.
SEBI said that FPIs could issue ODIs only to entities which did not have opaque structures (where the ultimate beneficiary is identifiable).