Light touch registration for FPIs investing in govt bonds: Ananth Narayan

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Error rates on settlement of trades for foreign portfolio investors (FPIs) have reduced under the T+1 settlement cycle from what it was under the T+2 cycle, a top regulatory official said on Tuesday.

Speaking at the CII Financing 3.0 Summit in Mumbai, SEBI whole time member Ananth Narayan said the regulator was working on easing the FPI registration process. “We have ensured common operating standards for all custodians that will do away with any regulatory arbitrage that was in play and are creating an online tracker to track new FPI applications. A light-touch registration process will be introduced for FPIs that only want to invest in government bonds,” he said.

FPI transition

The WTM said that earlier if an FPI licence expired the FPI would stay in limbo forever and could not buy or sell anything. “We have now allowed a one-time exercise for liquidating the portfolio and ensuring a smooth transition out of the country,” he said.

Existing FPIs setting up a new FPI do not have to fill a new common application form all over again. Instead, some fields will be automatically repopulated based on available data. “We have set aggressive timelines to do the registrations,” said Narayan.

FPIs will now be able to access their funds on the day of settlement. Today, FPIs can repatriate funds only on T+2 or T+3 as there are delays in getting tax certificates.

“Such delays were causing a huge amount of opportunity loss to FPIs. Concomitantly, custodians enjoyed the float income for an extra day, resulting in opaque, implicit charges stemming from inefficiencies in the system. The less of implicit charges we have the better it is for everyone,” said Narayan.

The regulator is trying to make life easier for certain categories of FPIs including insurance or pension funds and sovereign wealth funds. This could be by allowing them to use the FPI license to invest in assets other than equities, reducing the KYC periodicity for such funds and doing away with wet signatures, Narayan said.