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Indian regulatory body Securities and Exchange Board of India (SEBI) has come out with rules for the merger of Foreign Portfolio Investment (FPI) and non-resident Indians/overseas citizens routes to bring in a single regime for foreign investors and regulate NRI and person of Indian origin fund inflows.

The markets regulator has as well exempted housing finance companies and systematically significant NBFCs (Non-Banking Financial Companies) from the revelation of increase or decrease in shareholding due to encumbrance or release of encumbered shares, Sebi said in a notification.

A similar exemption is hitherto available to scheduled commercial banks and public financial institutions.

In another notification dated December 31, Sebi said if single and aggregate NRI/OCI/RI holdings in assets under management of FPI are below 25 percent and 50 percent, respectively, then such persons will be allowed to be constituents of the FPI.

In case of non-permanent contravention of investment limits, FPI will need to abide by within 90 days and in case it remains non-compliant even after 90 days, no fresh purchases will be permitted and such FPI will have to wind up its existing position in the Indian securities market in span 180 days.

The final regulation has been put in place after taking into account suggestions of a SEBI working group headed by H R Khan, former deputy governor at Reserve Bank of India.

Moreover, the regulator has relaxed its norms for clubbing of investment limits by well regulated foreign investors.

Currently, FPIs are treated as part of the same investor group and the investment limits of all such entities are clubbed for deriving the investment limit as relevant to a single FPI, in case of the same set of ultimate beneficial owners investing through multiple entities.

Under the new norm, multiple entities having common ownership, directly or indirectly, of more than 50 percent will be treated as part of the same investor group and their investment limits would be clubbed, as per the notification.

"Multiple entities having common ownership, directly or indirectly, of more than 50 percent or common control shall be treated as being part of the same investor group and the investment limits of all such entities shall be clubbed at the investment limit as applicable to a single FPI," it added.

Besides, the clubbing of investment limit would not be relevant in the case of entities having common control, if the FPIs are appropriately regulated public retail funds.

Public retail funds in most cases comprise insurance companies, pension funds and mutual funds or unit trusts that are open for retail subscriptions.

"In order to appropriately monitor investment concentration where common ownership or control is identified for such public retail funds, the Indian depositories shall maintain details of controlling entities on the basis of name, address, nationality, passport number/ any other identification card issued by government and provide appropriate reports to the board on a periodic basis," SEBI noted.

-Sowmya Sangam