RBI/2013-14/533 A.P. (DIR Series) Circular No.112 March
25, 2014
FOREIGN PORTFOLIO
INVESTOR - INVESTMENT UNDER PORTFOLIO INVESTMENT SCHEME, GOVERNMENT AND
CORPORATE DEBT
Attention
of Authorised Dealer Category – I (AD Category-I) banks is invited to the
Foreign Exchange Management (Transfer or Issue of Security by a Person Resident
outside India) Regulations, 2000 (the Principal Regulations) notified by the
Reserve Bank vide Notification No. FEMA. 20/2000-RB dated 3rd May 2000, as
amended from time to time.
2. The
extant guidelines for Portfolio Investment Scheme for Foreign Institutional
Investor (FII) and Qualified Foreign Investor (QFI) have since been reviewed
and it has been decided to put in place a framework for investments under a new
scheme called ‘Foreign Portfolio Investment’ scheme.
3. The
salient features of the new scheme are:
·
The portfolio investor registered in accordance
with SEBI guidelines shall be called ‘Registered Foreign Portfolio Investor
(RFPI)’. The existing portfolio investor class, namely, Foreign Institutional
Investor (FII) and Qualified Foreign Investor (QFI) registered with SEBI shall
be subsumed under RFPI;
·
RFPI may purchase and sell shares and
convertible debentures of Indian company through registered broker on
recognised stock exchanges in India as well as purchases shares and convertible
debentures which are offered to public in terms of relevant SEBI guidelines/
regulations.
o
RFPI may sell shares or convertible debentures
so acquired
a.
in open offer in accordance with the SEBI
(Substantial Acquisition of Shares and Takeovers) Regulations, 2011; or
b.
in an open offer in accordance with the
SEBI (Delisting of Equity shares) Regulations, 2009; or
c.
through buyback of shares by a listed Indian
company in accordance with the SEBI (Buy-back of securities) Regulations,
1998
o
RFPI may also acquire shares or convertible
debentures
a.
in any bid for, or acquisition of, securities in
response to an offer for disinvestment of shares made by the Central Government
or any State Government; or
b.
in any transaction in securities pursuant to an
agreement entered into with merchant banker in the process of market making or
subscribing to unsubscribed portion of the issue in accordance with Chapter XB
of the Securities and Exchange Board of India (Issue of Capital and Disclosure
Requirements) Regulations, 2009.
·
The individual and aggregate investment limits
for the RFPIs shall be below 10% (per cent) or 24% (per cent) respectively of
the total paid-up equity capital or 10% (per cent) or 24% (per cent)
respectively of the paid-up value of each series of convertible debentures
issued by an Indian company. Further, where there is composite sectoral
cap under FDI policy, these limits for RFPI investment shall also be within such
overall FDI sectoral caps;
·
RFPI shall be eligible to open a Special
Non-Resident Rupee (SNRR) account and a foreign currency account with
Authorised Dealer bank and to transfer sums from foreign currency account to
SNRR account at the prevailing market rate for making genuine investments in
securities. The Authorised Dealer bank may transfer repatriable proceeds (after
payment of applicable taxes) from SNRR account to foreign currency account ;
·
RFPI shall be eligible to invest in government
securities and corporate debt subject to limits specified by the RBI and
SEBI from time to time;
·
The investment by RFPI will be made subject to
the SEBI (FPI) Regulations 2014, modified by SEBI/Government of India from time
to time;
·
RFPI shall be permitted to trade in all exchange
traded derivative contracts on the stock exchanges in India subject to the
position limits as specified by SEBI from time to time;
·
RFPI may offer cash or foreign sovereign
securities with AAA rating or corporate bonds or domestic Government Securities,
as collateral to the recognized Stock Exchanges for their transactions in the
cash as well as derivative segment of the market.
4.
Any foreign institutional investor who holds a valid certificate of
registration from SEBI shall be deemed to be a registered foreign portfolio
investor (RFPI) till the expiry of the block of three years for which fees have
been paid as per the Securities and Exchange Board of India (Foreign
Institutional Investors) Regulations, 1995. A QFI may continue to buy, sell or otherwise
deal in securities subject to the SEBI (FPI) Regulations, 2014 for a period of
one year from the date of commencement of these regulations, or until he
obtains a certificate of registration as foreign portfolio investor, whichever
is earlier.
However,
all investments made by that FII/QFI in accordance with the regulations prior
to registration as RFPI shall continue to be valid and taken into account for
computation of aggregate limit.
5.
RFPI shall report the transaction to RBI as being reported by FII in LEC Form
as per extant practice.
6.
AD Category - I banks may bring the contents of the circular to the notice of
their customers/constituents concerned.
7.
Reserve Bank has since amended the Principal Regulations through the Foreign
Exchange Management (Transfer or Issue of Security by a Person Resident outside
India) (Second Amendment) Regulations, 2014 notified vide Notification No. FEMA.297/2014-RB dated March 13, 2014,
c.f. G.S.R. No. 189(E) dated March 19, 2014.
8. The
directions contained in this circular have been issued under sections 10(4) and
11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without
prejudice to permissions / approvals, if any, required under any other law.
Yours faithfully
(Rudra Narayan Kar)
Chief General Manager-In-Charge
Chief General Manager-In-Charge
