Govt to tighten OCB guidelines

New Delhi, Nov 5: The Union government will soon tighten norms for overseas corporate bodies (OCBs), while planning to relax rules for investments in derivatives by foreign institutional investors (FIIs) and simplify conversion of ADR/GDRS into shares tradeable in India.

The high level committee on capital markets, which met here on Monday, decided to tighten OCB norms in the wake of stock market scam in March, which witnessed huge fund diversion through these bodies.

“OCB route will see a revision. RBI will come out with the revised guidelines shortly,” joint secretary in ministry of finance J Bhagwati told reporters after the meeting.

“A consensus has emerged on OCB’s portfolio investment schemes from RBI, Sebi and the ministry,” Mr Bhagwati said but declined to divulge details.

Indication are that government would impose a minimum capital adequacy requirement for OCBs to carry out portfolio investments in the country’s secondary market, according to Mr Bhagwati.

The technical committee of RBI, Sebi, Irda and ministry of finance, also discussed the participation of FIIs in the derivatives markets.
Currently, FIIs are allowed to hedge investments in index futures but not in other derivatives like index options and futures on individual stocks, Mr Bhagwati said Sebi has been asked to come back with a liberalised norms pertaining to the maximum exposure and other modalities, he added.

The committee also took up the issue of simplifying norms on two way fungibility (conversion) of American and global depository receipts (ADR/GDRS). Government had allowed two-way fungibility of ADR/GDRS in the last Budget, according to Mr Bhagwati.

— PTI