Individual investors and associations from the Gulf countries will now be able to invest as ‘Qualified Foreign Investors’ in the Indian equity market.
Norms have been relaxed by the Finance Ministry to attract greater inflows of foreign funds.
Mr Thomas Mathew, Joint Secretary (Capital Market), Ministry of Finance, said, “We have received a lot of enquiries from big funds such as family wealth funds of these Gulf countries.”
The problem is that these countries, in their individual capacity, are not members of the Financial Action Task Force (FATF), while their association Gulf Cooperation Council is.
The original norms for QFI states residents and entities from FATF member countries can only come as QFI. That is why it has now been decided, “The residents of FATF member countries and those from the countries of the GCC and European Commission would now be eligible to be considered as QFI.” With this, the number of eligible countries has gone up to 45 from 34.
Separate investment limit
The Ministry has also created a separate sub limit of $1 billion for QFIs investment in corporate bonds and mutual fund debt schemes. This will be apart from $20 billion limit for corporate debt.
“With this the QFI framework would stand extended to all three important segments of the Indian capital market which are mutual fund, equity market and corporate bond market,” Mr Mathew added.
Easing of norms
It has also been decided to do away with the restriction on the number of days that funds could be kept in the individual account of QFIs. Existing norms say that funds remitted by QFIs can be kept here for just five days and if not invested within this period, it will be transferred back.
Mr Mathew said that money transferred back involves transaction cost which no investors would like to incur. Five days restriction was proving to be a dampener for genuine investors. Now funds can be kept here as long as the investors would like to have.
It has been decided to allow QFIs to open non-interest bearing rupee bank account with authorized dealers banks in India for receiving funds and making payment for transaction in securities they are eligible to invest.