Panel in favour of keeping NRI, FPI investment routes separate

Mumbai: A regulatory panel has recommended that the investment routes maintained for NRIs and foreign portfolio investors (FPIs) be kept separate as they now are, although the Centre was in favour of a merger to help achieve the ease-of-doing-business objective. Two top industry executives aware of the recommendations of the panel appointed by the Securities and Exchange Board of India (Sebi) told ET that the committee doesn’t favour a merger that was earlier proposed by the government as part of its broader commercial objective to ease business curbs and make India even more investor-friendly.However, the Sebi-appointed committee is reportedly of the opinion that such a merger would be fraught with regulatory complications since NRIs also use the investment route to make other investments, such as fixed deposits. Instead, the committee has suggested the existing portfolio investment scheme (PIS) be retained and NRIs also be given an option to come through the FPI route. That could boost fund flows from NRIs into Indian equities.The committee, which consisted of brokers, asset managers, custodians and leading banks, submitted its recommendations to Sebi late last month and the market regulator will soon take up the issue, people cited above added.“The idea is to make investing into India easier for our large expatriate community and the existing framework offers its own advantages. So, we took the view that the FPI route should be offered as an additional channel to the existing PIS route,” said a member of the expert panel. “The original proposal for merger between NRI and FPI route was not exactly apple to apple conversion.”The FPI route can be used by foreign investors who want to put money into listed equities or debt instruments in India. Whereas, the NRI PIS route is a more comprehensive framework through which NRIs can even invest in fixed deposits and real estate assets. Now if both routes are to be merged, there are questions as to what will happen to the other kinds of investments that NRIs make.

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