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Tuesday, Jun 29, 2004

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NRIs submit wish list to SEBI task force

Veena Venugopal

Mumbai , June 28

NOW that Indians are allowed to invest $25,000 abroad, non-resident Indians (NRIs) are seeking permission to similarly invest a maximum of $25,000 in the secondary market in India in a year without prior RBI approval. This is one of the recommendations that has been submitted by NRIs in a memorandum to the SMILE task force.

It may be recalled that the Securities and Exchange Board of India has constituted Securities Markets Infrastructure Leveraging Expert Task Force (SMILE) to study improvements in the Indian capital markets.

The memorandum recommends that NRIs should be allowed to square off net buys and sells of the same day for computing payment obligations and netting of short-term capital gains and losses in the portfolio investment scheme (PIS) account. Permission is also sought for NRIs to trade in the derivatives segment on repatriable basis and request has been sought to authorise banks to accept digital contract notes along with physical contract notes for trades done in PIS accounts.

At present, according to the rules of the stock exchange, members can set up trading terminals outside the country only within the confines of a fully owned branch. However, according to the local laws of the countries, especially in the Arab region, foreign entities can set up business establishments only in collaboration with local partners.

The memorandum recommends that members of Indian stock exchanges should be permitted to offer screen-based trading facilities through joint ventures in countries where local laws do not allow wholly owned businesses by foreign entities.

In order to aid NRIs to invest in initial public offers, the memorandum seeks to integrate IPO processing with the depository system and standardisation and fine tuning of operating procedures to be followed by registrars. Also, to facilitate crediting of IPO refunds into NRE accounts, RBI permit number should be printed on all NRI refund cheques, the memorandum suggests.

Dematerialisation of mutual funds has also been suggested as a measure to simplify NRI investment procedure.

The memorandum states that these measures, if implemented, would ensure a quantum jump in the secondary market through the PIS route.

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