New Delhi: India's capital market regulator has issued guidelines allowing 'qualified foreign investors' to invest up to $1 billion in local corporate bonds and mutual fund debt without any lock-in period, in an effort to stimulate foreign capital inflows in the country.
"In consultation with the Government of India (GoI) and RBI (Reserve Bank of India), it has now been decided to allow Qualified Foreign Investors (QFIs) to invest in Indian corporate debt securities and debt schemes of Indian mutual funds," Securities and Exchange Board of India (SEBI) said in a circular Wednesday.
QFIs are non-resident investors, other than SEBI registered foreign institutional investors (FIIs) and foreign venture capital investors (FVCIs). They can currently invest in schemes of Indian mutual funds and Indian equity shares by opening a demat account with a qualified Depository Participant (DP).
The $1 billion limit for foreign individuals is in addition to the $20 billion cap on investments by FIIs in local corporate bonds, the circular said.
Besides, QFIs have been permitted to invest 90% of $1 billion, or $900 million, without procuring a prior nod, it said.
However, once the investment reaches the $900-million mark, QFIs will have to seek prior approval from the depository concerned through the DP. The QFIs will have to specify their name, PAN (permanent account number) and other unique identification number, by way of any mode of communication as specified by the depositories in consultation with each other as part of the approval process, it added.
"When the aggregate investments of all the QFIs reaches 90% of the investment limit, notice informing the same shall be published by the depositories on their websites and no fresh purchases shall be allowed without prior approval of the depositories," it said.
Further, DPs will ensure KYC (know your customer) of the QFIs as per the guidelines outlined by the capital market regulator, it said.
Recently, the government also deemed eligible residents of FATF (Financial Action Task Force) member countries and those from the countries of the GCC (Gulf Cooperation Council) and European Commission to be considered as QFI. This has taken the number of eligible countries to 45 from 34.