A special class of investors — Qualified Foreign Investors — that would include individuals and bodies such as pension funds and are separate from Foreign Institutional Investors has been created.
They will be permitted to invest in domestic mutual funds through Unit Confirmation Receipts or depository participant route and all investments from the two routes would be under the purview of market regulator Sebi. The new class of foreign investors will be allowed to invest up to $10 billion in domestic mutual funds from August 1
However, only those QFIs that are compliant with know-your-customer (KYCs) norms will be eligible to invest. Depository participants (DPs) as well as the mutual funds would have to ensure that the QFIs have followed proper KYC guidelines. Further, only those QFIs that are compliant with FATF (Financial Action Task Force) norms would be eligible to invest. Under the scheme, each such investor would be allowed to open only one account in one of the qualified DPs. The Reserve Bank of India will also issue required circulars to enable such investments under FEMA laws.
Purpose of creating category of QFI :
1) The move is aimed at easing volatility in the capital markets through long-term investments.
2)The move is expected to bring in ‘more depth’ in the domestic mutual funds industry.
3)It is aimed at broad-basing the flow of foreign investment in the Indian stock market, so that dependence on FII funds, considered as hot money, is reduced.
They will be permitted to invest in domestic mutual funds through Unit Confirmation Receipts or depository participant route and all investments from the two routes would be under the purview of market regulator Sebi. The new class of foreign investors will be allowed to invest up to $10 billion in domestic mutual funds from August 1
However, only those QFIs that are compliant with know-your-customer (KYCs) norms will be eligible to invest. Depository participants (DPs) as well as the mutual funds would have to ensure that the QFIs have followed proper KYC guidelines. Further, only those QFIs that are compliant with FATF (Financial Action Task Force) norms would be eligible to invest. Under the scheme, each such investor would be allowed to open only one account in one of the qualified DPs. The Reserve Bank of India will also issue required circulars to enable such investments under FEMA laws.
Purpose of creating category of QFI :
1) The move is aimed at easing volatility in the capital markets through long-term investments.
2)The move is expected to bring in ‘more depth’ in the domestic mutual funds industry.
3)It is aimed at broad-basing the flow of foreign investment in the Indian stock market, so that dependence on FII funds, considered as hot money, is reduced.
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