ANNOUNCEMENT 09 Aug 2011In August 2011, the government of India announced changed rules for foreign investors.
NUMBER OF INTERVENTIONS
9 August 2011
3 November 2011
13 January 2012
16 July 2012
This measure lists various Circulars of the Reserve Bank of India (RBI) specifying the investment limits and conditions for Qualified Foreign Investors (QFIs). The legal term was created in August 2011. The trading authorities of QFIs have repeatedly been expanded since.
Circular as on 9 August 2011 -
(i) Qualified Foreign Investors - QFIs are non-resident investors (other than SEBI registered FIIs and FVCIs) who meet the Know Your Customer (KYC) requirements of SEBI.
(ii) QFIs are allowed to purchase on repatriation basis rupee denominated units of equity schemes of domestic MFs in accordance with the conditions of SEBI and RBI
(iii) The above investment can be through the Direct Route of SEBI registered Depository Particpant(DP) or the indirect route of Unit Confirmation Receipt (UCR). The investments limits under both routes have been set at USD 10 billion
(iv) QFIs are allowed to invest, under both routes as above, up to an additional amount of USD 3 billion in units of domestic MF debt schemes that invest in infrastructure debt of a minimum residual maturity of 5 years. This investment limit is within the USD 25 billion ceiling for FII investment in corporate infrastruture bonds.
(v) All investments have to comply with the regulations of the foreign exchange management regulations as per Notification No. FEMA 20/2000-RB dated 3 May 2000.
Circular as on 3 November 2011 -
(i) QFIs are allowed to invest in non-convertible debentures/bonds issued by Non-Banking Financial Companies categorized as "Infrastructure Finance Companies (IFCs)" by the RBI within the limit of USD 3 billion
(ii) The required 5 year residual maturity would now refer to the original maturity of the instrument at the time of the first pruchase by the QFI.
Circular as on 13 January 2012 -
(i) QFIs are allowed to purchase on repatriation basis equity shares of Indian companies subject to conditions mentioned in the Circular. The individual and aggregated limits for such investments will be 5% and 10% of the paid up capital of the Indian company.
Circular as on 16 July 2012 -
(i) QFIs are allowed to invest through SEBI registered Qualified Depository Participants in eligible corporate debt instruments, which include listed Non-Convertible Debentures, listed bonds of Indian companies, listed units of Mutual Fund debt schemes and "to be listed" corporate bonds directly from the issuer or through a registered stock broker in India.
(ii) Further, the QFIs are allowed to sell these debt securities acquired through a registered stock broker in India or by way of buyback or redemption by the issuer.
(iii) Such investments are subject to a ceiling of USD 1 billion.
QFI - Qualified Foreign Investor
SEBI - Secrurities and Exchange Board of India
FII - Foreign Institutional Investor
FVCI- ForeignVenture Capital Investor
MF - Mutual Fund
RBI - Reserve Bank of India