NRIs are currently allowed to invest in Indian markets directly and indirectly through multiple routes.
A SEBI panel may suggest merging the non-resident Indians (NRI) portfolio investment schemes (PIS) routes with that of foreign portfolio investors (FPIs), which will help in establishing a uniform regime for all foreign portfolio investors, as per a report in The Economic Times.
The regime is currently unregulated and this move will help SEBI regulate NRI investments in India, sources told the paper.
Currently, NRIs can invest in Indian markets directly and indirectly. They can invest under PIS, purchase mutual funds, invest in private equity, and use offshore FPI route. They can also invest in debentures of Indian companies and government securities.
These investments are regulated under the Foreign Exchange Management Act other than the SEBI guidelines and FDI policy.
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The markets regulator had set up a panel of custodians, lawyers and chartered accounts, headed by former Reserve Bank of India (RBI) deputy governor HR Khan. This panel submitted a draft report in September and will submit a final report in November which is expected to propose sweeping changes in FPI regulations, according to sources.
Experts say that consistency in policies is key for such a move. "Merging these two routes will act as a forced diktat on NRIs to only invest through fee-based pooling vehicles like FPIs, mutual funds and alternative investment funds and not directly invest in India," Tejesh Chitlangi, senior partner at IC Universal Legal, told the paper.
He added that this proposal by the regulator comes as a surprise as it was looking to curtail NRI participation via FPIs since the direct route was available to them.