The Securities and Exchange Board of India (SEBI) on Monday cleared the path for hiking the disclosure limit of foreign portfolio investors (FPIs) to ₹50,000 crore from the current ₹25,000 crore to boost investment in the Indian market. The move was approved during the SEBI board meeting earlier during the day.
The regulator said that this change was required because there has been a sharp increase in trading volumes in the cash equity market. As the earlier threshold was determined in FY 2022-23, market trading volumes have increased more than two times.
Under the revised rules, only FPIs holding over ₹50,000 crore in Indian equities will be required to make additional disclosures, as per SEBI’s circular issued on August 24, 2023. These disclosures are aimed at ensuring compliance with the Prevention of Money Laundering Act (PMLA) and related regulations, with the primary objective of preventing misuse of investments and maintaining financial transparency.
"Cash market equity trading volumes have increased over twice since FY 2022-23 (when the thresholds were established) up to the present FY 2024-25. Considering this, the Board sanctioned a suggestion to raise the applicable threshold from the current ₹25,000 crore to ₹50,000 crore," SEBI stated in a release.
Though there has been an increase in threshold, SEBI has left one important condition—FPIs will continue to have to provide additional disclosures if over 50% of their equity AUM are within a single group of companies.
Clarifying concerns regarding new norms, SEBI Chairperson Tuhin Kanta Pandey explained that many funds such as public funds and sovereign funds were already excluded from these further disclosures.
"Most of the funds (public, sovereign funds) were exempted from these additional disclosures. There are already PMLA and KYC disclosures for each FPI. We were merely seeking more detailed disclosures," Pandey said.
Furthermore, SEBI declared alterations to investment guidelines for Category II Alternative Investment Funds (AIFs). The regulator has relaxed present regulations and permitted such funds to invest in rated 'A' and below listed debt securities.
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