The government has ruled out any further tightening of disclosure norms to specifically identify investors investing in the Indian market through participatory notes.
?There is no such proposal under consideration of the government for the present,? minister of state for finance PK Bansal told Lok Sabha in a written reply on Friday. ??At this point of time, it is felt that disclosure norms laid down under the Sebi (Foreign Institutional Investors) Regulations, 1995, for FIIs issuing PNs are adequate,? P-notes are an indirect way through which unregistered overseas investors?who cannot directly play in the stock market in India?invest in Indian stocks. P-notes are derivatives products with securities as underlying. Foreign institutional investors (FIIs) and their agents issue P-notes to overseas clients investing in India.
In October last year, Securities & Exchange Board of India (SEBI) put various curbs on P-notes to make invest via route more transparent. SEBI forbid FIIs and their sub-agents from issuing any fresh P-notes in the derivative market and asked them to wind up their position in 18 months. Simultaneously, it imposed curbs on P-notes in the spot market.
The Bombay Stock Exchange benchmark index, Sensex, tanked 1,700 points immediately after SEBI proposed these curbs, but gained later after finance minister P Chidambaram assured that there would be no absolute ban on these tools.
The markets regulator intends to encourage FIIs to register in India and invest directly here, rather than coming via the P-notes route.
This is expected to increase transparency in their operations. The number FIIs operating India has increased to 1,303 from 1,100 in the past six months since the curbs were put in place, Chidambaram told Lok Sabha on Friday. SEBI is further planning to ease the registration process and make it more flexible for FIIs to register here. ?We want to make it more flexible. We are taking more time so that more FIIs can easily get registered. We are expecting to notify it anytime now,? Sebi chairman CB Bhave said in Delhi on March 5.