Seeking to assuage foreign investors, Economic Affairs Secretary S C Garg said Tuesday there is nothing new in the Sebi circular of April 10, which some experts are asserting could lead to outflow of USD 75 billion.
Garg asserted that Sebi last month extended the deadline of the circular until December and wondered that why there was much ado about the proposed guidelines. Market regulator Sebi also said that it was “preposterous and highly irresponsible” to claim that USD 75 billion will move out of India because of the April 10 regulatory move.
Stock markets fell for the fifth straight session Tuesday on sustained capital outflows by foreign funds after an investor lobby group named AMRI flagged Monday the new Sebi KYC norms, if not amended, could lead to outflows of USD 75 billion from India, hurting the rupee and stocks. Speaking with reporters here, Garg said, “April 10 circular has been put off to December.
There is nothing in operation at the moment … why there is so much ado.” Some foreign portfolio investors (FPIs) are believed to have earlier expressed concerns over the proposed changes in rules, for which Sebi has already granted more time. Garg said NRIs are permitted to invest in Indian securities with the limit of 5 per cent up to which they are permitted to invest in single securities.
“If some NRI is a beneficial owner then that has been defined. If you have economic interest as well as you manage that is not permissible,” he said. The AMRI (Asset Management Roundtable of India) said that the immediate impact of the new norms, if not amended, would be that USD 75-billion investment managed by overseas citizens of India (OCIs), persons of Indian origin (PIOs) and non-resident Indians (NRIs) will be disqualified from investing into India, and the funds will have to be withdrawn and liquidated within a short time-frame.
The market regulator, in April, had asked Category II and III FPIs to provide list of their beneficial owner (BO) in a prescribed format within six months. It had, however, last month extended the deadline by two months till December for providing a list of beneficial owners, and assured them that issues raised will be looked into by an expert panel.