The Securities and Exchange Board of India (SEBI) has strongly countered the claim made by a body of overseas investors that a circular issued by the regulator in April on tighter KYC - Know Your Client - norms would lead to outflows totalling a whopping $75 billion.
“It is preposterous and highly irresponsible to claim that 75 billion dollars of FPI investment will move out of the country because of SEBI's circular issued in April 2018,” said a statement issued by SEBI on Tuesday.
The SEBI statement was in response of a statement issued by AMRI - Asset Managers Roundtable of India - on behalf of 13 investors including, Morgan Stanley Asset Management, Kotak Mahindra UK, Edelweiss Capital, Enam AMC, Geosphere LLC and AMANSA Capital among others.
“The problem is that while the circular was issued to enhance KYC norms, it has instead resulted in restrictions on investments and in some cases, it has even placed a blanket ban on investments through certain FPIs,” said the letter by Nandita Parker, President, AMRI.
The letter written to the SEBI chairman Ajay Tyagi on August 29 has also been sent to Prime Minister Narendra Modi, Ministry of Finance and the Reserve Bank of India.
“An immediate impact of the circular [if not amended] is that from December 31, 2018 [the date set by SEBI’s Circular dated August 21, 2018 for existing FPIs to ensure compliance with the stipulations of the circular], the said $75 billion investment will be disqualified from investing into India and will have to be withdrawn and liquidated within a short time frame, thereby adversely affecting the Indian Markets and Indian currency,” it further added.
On April 10, the capital market watchdog issued a circular stating that entities like non-resident Indians (NRI), persons of Indian origin (PIO) and overseas citizen of India (OCI) cannot be the beneficial owners (BOs) of any foreign portfolio investor.