RBI allows foreign portfolio investors to open rupee account
26 Mar 2014
The Reserve Bank of India (RBI) has allowed registered foreign portfolio investors (RFPI), including foreign institutional investors and qualified foreign investors, to open special non-resident rupee (SNRR) accounts and foreign currency accounts with banks. RBI has also permitted transfer of sums from a foreign currency account to an SNRR account, at prevailing market rates, for genuine investments in securities.
This is in line with the revision of the extant guidelines for portfolio investment scheme for foreign institutional investor (FII) and qualified foreign investor (QFI) by the Securities and Exchange Board of India (SEBI), which has put in place a framework for investments under a new scheme called 'Foreign Portfolio Investment' scheme.
Under the revised scheme, both foreign institutional Investor (FII) and qualified foreign investor (QFI) registered with SEBI will be subsumed under 'Registered Foreign Portfolio Investor (RFPI).
RFPI will be eligible to open a special non-resident rupee (SNRR) account and a foreign currency account with authorised dealer bank and to transfer sums from foreign currency account to SNRR account at the prevailing market rate for making genuine investments in securities.
The authorised dealer bank may transfer repatriable proceeds (after payment of applicable taxes) from SNRR account to foreign currency account, RBI said in a notification on Tuesday.
RFPI will be eligible to invest in government securities and corporate debt subject to limits specified by the RBI and SEBI from time to time, subject to the SEBI (FPI) Regulations 2014, modified by SEBI / Government of India from time to time.
RFPI will also be permitted to trade in all exchange traded derivative contracts on the stock exchanges in India subject to the position limits as specified by SEBI from time to time.
RFPI may offer cash or foreign sovereign securities with AAA rating or corporate bonds or domestic government securities, as collateral to the recognized stock exchanges for their transactions in the cash as well as derivative segment of the market.
RFPI may purchase and sell shares and convertible debentures of an Indian company through registered broker on recognised stock exchanges in India as well as purchases shares and convertible debentures which are offered to public in terms of relevant SEBI guidelines / regulations.
RFPI may sell shares or convertible debentures so acquired in open offer in accordance with the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011; or in an open offer in accordance with the SEBI (Delisting of Equity shares) Regulations, 2009; or through buyback of shares by a listed Indian company in accordance with the SEBI (Buy-back of securities) Regulations, 1998.
RFPI may also acquire shares or convertible debentures in any bid for, or acquisition of, securities in a disinvestment of shares made by the central government or any state government or in any transaction in securities pursuant to an agreement entered into with merchant banker in the process of market making or subscribing to unsubscribed portion of the issue in accordance with SEBI regulations.
SEBI has fixed the individual and aggregate investment limits for the RFPIs at 10 per cent and 24 per cent, respectively, of the total paid-up equity capital or 10 per cent and 24 per cent, respectively, of the paid-up value of each series of convertible debentures issued by an Indian company.
Further, where there is composite sectoral cap under FDI policy, these limits for RFPI investment shall also be within such overall FDI sectoral caps.
Any foreign institutional investor who holds a valid certificate of registration from SEBI shall be deemed to be a registered foreign portfolio investor (RFPI) till the expiry of the block of three years for which fees have been paid as per the Securities and Exchange Board of India (Foreign Institutional Investors) Regulations, 1995.
A QFI may continue to buy, sell or otherwise deal in securities subject to the SEBI (FPI) Regulations, 2014 for a period of one year from the date of commencement of these regulations, or until he obtains a certificate of registration as foreign portfolio investor, whichever is earlier.
However, all investments made by that FII/QFI in accordance with the regulations prior to registration as RFPI will continue to be valid and taken into account for computation of aggregate limit.
This is in line with the revision of the extant guidelines for portfolio investment scheme for foreign institutional investor (FII) and qualified foreign investor (QFI) by the Securities and Exchange Board of India (SEBI), which has put in place a framework for investments under a new scheme called 'Foreign Portfolio Investment' scheme.
Under the revised scheme, both foreign institutional Investor (FII) and qualified foreign investor (QFI) registered with SEBI will be subsumed under 'Registered Foreign Portfolio Investor (RFPI).
RFPI will be eligible to open a special non-resident rupee (SNRR) account and a foreign currency account with authorised dealer bank and to transfer sums from foreign currency account to SNRR account at the prevailing market rate for making genuine investments in securities.
The authorised dealer bank may transfer repatriable proceeds (after payment of applicable taxes) from SNRR account to foreign currency account, RBI said in a notification on Tuesday.
RFPI will be eligible to invest in government securities and corporate debt subject to limits specified by the RBI and SEBI from time to time, subject to the SEBI (FPI) Regulations 2014, modified by SEBI / Government of India from time to time.
RFPI will also be permitted to trade in all exchange traded derivative contracts on the stock exchanges in India subject to the position limits as specified by SEBI from time to time.
RFPI may offer cash or foreign sovereign securities with AAA rating or corporate bonds or domestic government securities, as collateral to the recognized stock exchanges for their transactions in the cash as well as derivative segment of the market.
RFPI may purchase and sell shares and convertible debentures of an Indian company through registered broker on recognised stock exchanges in India as well as purchases shares and convertible debentures which are offered to public in terms of relevant SEBI guidelines / regulations.
RFPI may sell shares or convertible debentures so acquired in open offer in accordance with the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011; or in an open offer in accordance with the SEBI (Delisting of Equity shares) Regulations, 2009; or through buyback of shares by a listed Indian company in accordance with the SEBI (Buy-back of securities) Regulations, 1998.
RFPI may also acquire shares or convertible debentures in any bid for, or acquisition of, securities in a disinvestment of shares made by the central government or any state government or in any transaction in securities pursuant to an agreement entered into with merchant banker in the process of market making or subscribing to unsubscribed portion of the issue in accordance with SEBI regulations.
SEBI has fixed the individual and aggregate investment limits for the RFPIs at 10 per cent and 24 per cent, respectively, of the total paid-up equity capital or 10 per cent and 24 per cent, respectively, of the paid-up value of each series of convertible debentures issued by an Indian company.
Further, where there is composite sectoral cap under FDI policy, these limits for RFPI investment shall also be within such overall FDI sectoral caps.
Any foreign institutional investor who holds a valid certificate of registration from SEBI shall be deemed to be a registered foreign portfolio investor (RFPI) till the expiry of the block of three years for which fees have been paid as per the Securities and Exchange Board of India (Foreign Institutional Investors) Regulations, 1995.
A QFI may continue to buy, sell or otherwise deal in securities subject to the SEBI (FPI) Regulations, 2014 for a period of one year from the date of commencement of these regulations, or until he obtains a certificate of registration as foreign portfolio investor, whichever is earlier.
However, all investments made by that FII/QFI in accordance with the regulations prior to registration as RFPI will continue to be valid and taken into account for computation of aggregate limit.