Sebi permits up to 100% aggregate NRI corpus contribution for FPIs based out of GIFT IFSC

Markets regulator Securities and Exchange Board of India (SEBI) has allowed up to 100% aggregate contribution by non-resident Indians, Overseas Citizens of India, and Resident Indians in the corpus of FPIs that are based out of International Financial Services Centre (IFSC).

The move is expected to enhance investment by Foreign Portfolio Investors (FPIs) in India.

In a circular issued on Thursday, Sebi said it has amended FPI rules to "provide flexibility of having up to 100% aggregate contribution by non-resident Indians (NRIs), Overseas Citizens of India (OCIs) and Resident Indians (RI) Individuals in the corpus of FPIs based in IFSCs in India and regulated by International Financial Services Centres Authority (IFSCA)".

Over the years, there has been a consistent demand to channel more NRI and OCI investments into the Indian securities markets by enabling greater participation of NRIs and OCIs in FPI corpuses.

In the July 2019 budget speech, Finance Minister Nirmala Sitharaman had also recognized that despite India being the world's top remittance recipient, NRI investment in Indian capital markets remains relatively low.

At the time of registration, an FPI applicant must submit a declaration to their DDP (Designated Depository Participant) stating its intent to have 50 % or more of their corpus contributed by NRIs, OCIs, and resident Indians, Sebi said.

Existing FPIs have six months from the date of the circular to submit this declaration. The declaration can only be reviewed during the renewal of registration.

Applicants must provide their DDP with copies of the PAN cards of all NRI/OCI/RI individual contributors and detail their economic interest.

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If a contributor lacks a PAN, the applicant must submit a declaration from NRIs/OCIs stating they have no PAN or taxable income in India.

For non-individual constituents controlled by NRIs/OCIs/RIs, or where these individuals hold 50 % or more ownership, the FPI must provide PAN or suitable declarations and identity documents.

According to notification by Sebi on June 25, NRIs, OCIs, and RIs can be constituents of an FPI.

However, the contribution of a single NRI, OCI, or RI must be less than 25 % of the total FPI corpus, and the combined contribution from NRIs, OCIs, and RIs must be less than 50 % of the total FPI corpus.