SEBI overhauls FPI norms

Press Trust of India Mumbai | Updated on August 21, 2019 Published on August 21, 2019

FPIs invested a net Rs 2,096.38 crore in the debt securities.   -  istock

Also gives credit rating agencies more power to vet entities

Unveiling a raft of reform measures, markets watchdog SEBI on Wednesday relaxed compliance requirements for foreign portfolio investors, tweaked norms to boost startups and decided on a ₹1 crore reward for informants in insider-trading cases.

The Securities and Exchange Board of India also decided to allow issuance of municipal bonds by smart cities, eased buyback norms for companies with housing finance and NBFC arms, tightened norms related to loan-default disclosures by listed companies to rating agencies and made stricter rules for mutual funds.

The proposals were approved by the SEBI board at its meeting here on Wednesday.

Easier KYC for FPIs

In a significant move, the watchdog decided to simplify Know Your Client (KYC) requirements for foreign portfolio investors (FPIs) as well as broad-based criteria for them.

FPIs will be classified into two categories instead of three, while the requirements for issuance and subscription of offshore derivative instruments (ODIs) will be rationalised.

Further, FPIs will be permitted off-market transfer of securities which are unlisted, suspended or illiquid, to a domestic or foreign investor, Sebi said in a release.

Against the backdrop of concerns over banks citing ‘client confidentiality’ to resist sharing of information on delayed loan repayments and possible defaults by their borrowers, SEBI cleared new norms to make it mandatory for companies to provide these details to credit rating agencies.

Rating agencies empowered

The watchdog would amend its regulations for credit rating agencies to ensure that any listed or unlisted entity, before getting rated, gives an explicit consent to the agencies for obtaining full details about borrowings from their lenders. Further, smart cities and other registered entities working in areas of city planning and urban development work would be permitted to raise funds by issuing municipal bonds.

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Published on August 21, 2019
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