New Delhi: The government on Tuesday sought to calm the markets by stating overseas investors of Indian origin were allowed to buy up to 5 per cent in any security under current regulations after markets fell for the second consecutive day on FPIs protesting over an Sebi circular coming up for compliance later this year that bans the dual role of NRI investors doubling as fund managers.
Economic Affairs secretary SC Garg said, “There is nothing in operation at this moment and what’s all ado about? You cannot manage funds and also have economic interests both.” The markets’ plunge was accentuated after it became clear that there would be no review of this when it came up for compliance three months later.
Elaborating on the issue, Garg said, “NRIs are permitted to invest in Indian securities up to 5 per cent cap up to which they can invest in single security. When they try to manage funds from others through fund management and are registered as FPIs, that’s where the issue comes up. If some NRI is a beneficial owner then that has been defined as well. You have economic interests as well as you manage (the funds) that is not permissible in the law of today.”
As the economic affairs secretary stood by the circular, it was clear that the government had no plans for making changes. On Monday, an industry group named AMRI had warned that Sebi’s new guidelines would force out $75 billion foreign funds, managed by Indians, and makeup nearly 17 per cent of the total $450 billion of existing FPIs.