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Foreign individual investors would soon be able to invest in equity oriented mutual funds without having to register with the SEBI.
The Finance Ministry on Thursday said that the 2011-12 Budget announcement of allowing mutual funds to accept subscriptions from foreign investors would soon be operationalised.
Under the proposed facility, foreign investors, other than SEBI-registered FIIs and sub-accounts, meeting the know-your-customer (KYC) requirement for equity schemes would be allowed to invest in such schemes. This will widen the class of foreign investors with exposure to the Indian equities market.
“We will soon operationalise this (facility)”, Mr R Gopalan, Secretary, Department of Economic Affairs in the Finance Ministry told an Assocham summit on capital markets here.
2 routes
The Government and the regulators are looking at two routes for allowing foreigners in mutual funds. Plans are afoot to create a new class of investor, Qualified Foreign Investors (QFIs) who could register with depository participants in India to invest in mutual funds directly.
Also, on the anvil is a mechanism — unit confirmation receipt (UCR) system where a foreign investor can go to depositories in his home country and place orders on custodian banks in India. The custodian banks will issue UCRs against the underlying MFs.
Currently only foreign institutional investors (FIIs) and sub-accounts registered with SEBI and also Non-resident Indians (NRIs) are allowed to invest in mutual fund schemes.
Meanwhile, Mr Gopalan sought to allay the concerns of market participants that the Government and the regulators were moving too slowly on new policy initiatives and their implementation. “From a policy perspective, we want to ensure that any changes in the market structure are introduced in a gradual manner. We want to ensure that the stability of the existing system is not compromised,” he said.
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