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Our Bureau

Mumbai, Nov. 24 The Government has set up a working group to review the policy on foreign portfolio investments. The group is headed by Mr U.K. Sinha, Chairman and Managing Director, UTI Mutual Fund.

The terms of reference of the working group include: review of the existing policy on foreign inflows; study of portfolio investment by FIIs and NRIs, venture capital firms, private equity investors and recommend ways to remove policy hurdles, if any, said a member of the group.

The group is also expected to review the FII investments through Participatory Notes.

Mr Sinha was also a member of the Ashok K. Lahiri committee that submitted its report on Liberalisation of Foreign Institutional Investment in 2004. The Committee had recommended gradual phasing out of Participatory Notes.

The member representing RBI had opposed this and called for a total ban P-Notes.

Members of the new working group include Mr Ravi Narian, Managing Director of NSE; Mr K.P. Krishnan, Joint Secretary - Capital Markets, Ministry of Finance; and Mr K.N. Vaidyanathan, Executive Director of SEBI.

The working group has to submit its report in four months.

In October 2007, SEBI had partially restricted investments by P-Notes route after the foreign inflows through P- Notes rose to more than 50 per cent of the total FII inflows.

Following the SEBI restrictions, investments though the P-Notes route dropped to around 17 per cent in December 2008. As on October 2009, it was 16.5 per cent. There has been a surge in the FIIs inflows in 2009. FII inflows in the current year crossed the $15-billion mark ($15.269 billion or Rs 73,247 crore) as on November 23, 2009, according to SEBI data.

The Ashok Lahiri Committee which submitted its report in 2004 had suggested that P-Notes emanating from un-registered jurisdictions should be phased out by 2009.

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