Finance minister P Chidambaram on Tuesday met a clutch of foreign institutional investors (FIIs) and assured them of policy support for investments in the country.
In a closed door meeting with Goldman Sachs, Bank of America-Merrill Lynch, Citi, GIC Singapore and Deutsche Bank, the minister is learnt to have told them the government will consider removing the short-term capital gains tax, allowing FIIs to invest in currency derivatives and foreign exchange markets.
According to sources, the government may also allow hedging for FIIs’ investments in domestic markets.
The Reserve Bank of India (RBI) had imposed some controls in August on institutional participation in the currency derivatives market.
The FIIs also asked the minister that they be treated on a par with domestic institutional investors on the issue of collaterals. Currently, domestic institutional investors can use cash as well as securities as collateral whereas FIIs can use only cash as collateral for their transactions.
?We meet FIIs at times when things don’t go well economically. We hardly have interactions with them during ‘peace-time’, so to speak. We are looking to change that,? said an official. The meeting was attended by economic affairs secretary Arvind Mayaram and other senior finance ministry officials.
The FIIs are also said to have discussed marco-economic matters such as India’s current account deficit and fiscal deficit targets, which, they were assured promptly, will be met.
?Everyone was bullish, there were no concerns,? Chidambaram told reporters when asked about the meetings.
Later in the evening, Mayaram and senior ministry officials met RBI deputy governor HR Khan and officials from the central bank as well as Securities and Exchange Board of India to discuss clarifications on the definitions of FII and Foreign Direct Investment (FDI).
In his FY14 budget speech, Chidambaram had laid down a basic difference when he said that any foreign investment above 10% would be considered an FDI, while anything below would be an FII. However, given the complexities of investing in India, he had set up a committee to rationalise the various forms of investment.
?We have more of less decided on the formulation of FDI and FII. There are some transitional issues which we talked about,? Khan said. Mayaram added that the final guidelines on FDI and FII investments will be released in the coming weeks.