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QFI route: Question mark over Gulf investments

Our Bureau New Delhi | Updated on November 15, 2017 Published on January 10, 2012

Finance Ministry yet to clarify whether Gulf nations check illegal activities





Despite an “overwhelming” response from investors in the Gulf countries, uncertainty prevails whether qualified financial investors (QFIs) from these countries will be able to utilise the QFI route to invest in the Indian market.

The Finance Ministry, on January 1, had allowed QFIs to invest directly in Indian equities.

Such investors were allowed to invest either through the secondary market or through the initial public offer (IPO) or follow on public offer (FPO) of an Indian Company. The market regulator SEBI and the RBI are expected to issue formal notification by January 15.

Confusion

However, the status of QFIs from the Gulf countries, where there is a large appetite for Indian paper, remains unclear. The confusion is over whether GCC (Gulf Co-operation Council) countries could be considered compliant with the requirements of the Financial Action Task Force (FATF), a global inter-governmental body set up to combat money laundering and other illegal financial activity.

The Finance Ministry had earlier said, only investors from FATF and The International Organisation of Securities Commission's (IOSCO) MOU-complaint countries will be considered as QFIs. There are 80 such countries.

Investors from Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates have now written to the Finance Ministry seeking clarification on the issue. While the GCC is an FATF associate, individual member countries are not.

In a letter to the Finance Minister, Mr Pranab Mukherjee, a prominent Sharjah-based investment firm Al Saud Company has pointed out that the GCC) is “a full member of the Financial Action Task Force (FATF).

“To monitor and asses the progress of its members in implementing FATF standards, FATF conducts a mutual evaluation exercise jointly with the regional anti money laundering and counter terrorist financing body for the West Asia and North Africa, MENAFATF,” a FATF associate.

Another issue is whether investors from Oman and UAE will be eligible, as they are part signatories to the IOSCO.

Meanwhile, the Finance Ministry has claimed that it is getting queries from across the world for investing through the QFI route. Mr Thomas Mathew, Joint Secretary (Capital Market) in the Finance Ministry said, “We have got response even from a country like Poland much before the notifications were to be issued.”

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Published on January 10, 2012
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