SEBI’s norms for FPIs

  • Category
    Economy
  • Published
    3rd Sep, 2019

Securities and Exchange Board of India has liberalised norms for Foreign Portfolio Investors.

Context

Securities and Exchange Board of India has liberalised norms for Foreign Portfolio Investors.

About

Issue

  • The Union Budget 2019 imposed an additional surcharge on the Foreign Portfolio Investors (FPI). As a result, foreign investors started taking their investment flow out of India’s capital market.
  • More than Rs. 20,000 Crore has left Indian shores in the last few weeks.
  • As a result, SEBI responded with the below measures on the recommendation of HR Khanna Committee.

Measures Taken:

  • The registration process has been simplified by doing away with the broad eligibility criteria.
  • They will now face fewer restrictions while selling their shares in off market (whn stock exchange is not involved)
  • Entities registered at an international Financial Service will be automatically classified as FPI.
  • Central banks who are not members of Bank of International Settlements are also allowed to register as FPI.

Difference between Foreign Portfolio Investment (FPI) and Foreign Direct Investment (FDI)

  • FPI consist of securities and other financial like Bonds, Mutual Funds held by an investor in another country. It does not provide direct ownership of the asset and is relatively liquid. They are basically short term investors.
  • FDI lets an investor purchase a direct business interest in a foreign country. They are long term investments.

Securities and Exchange Board of India

  • Securities and Exchange Board of India is a government established in 1988 authority which controls the securities market in India. Indian Parliament passed SEBI Act 1992 in 1992 India which made SEBI a statutory body. SEBI functions to fulfill the requirements of the following three categories.
    • Issuers –It provides a marketplace in which the issuers can increase finance properly.
    • Investors –It ensure safety and supply of precise and accurate information
    • Intermediaries –It enables a competitive professional market for intermediaries.
  • The headquarters of SEBI is situated in Mumbai. The regional offices of SEBI are located in Ahmadabad, Kolkata, Chennai and Delhi.

ORGANISATIONAL STRUCTURE

Securities and Exchange Board of India is administered by its board of members. The board of SEBI consist of:

  • The Chairman by nominated by Government of India
  • Two members from finance ministry
  • One member from Reserve Bank of India
  • Five members nominated by Union Government of India

OBJECTIVES

  • To control activities of stock exchange
  • To safeguard the rights of stockholders and also to guarantee the security of their investment
  • To avoid fraudulence by harmonizing its statutory regulations and self-regulating business.
  • To administer and develop guidelines for intermediaries

FUNCTIONS

  • It manages the security markets in India
  • It analysis the trading of stocks and safes the security market from the malpractices.
  • It controls the stockbrokers and sub- stockbrokers
  • It provides education regarding market to the investors to enhance their knowledge

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