FPIs may be given three months to reduce concentrated exposure

Foreign portfolio investors (FPIs) who want to avoid making additional public disclosures will probably be given a less lengthy deadline to reduce their interests than the capital market regulator had initially anticipated.

According to Sebi’s new regulations, FPIs that have over fifty percent of their equity assets under the leadership of a single corporate group or have a total equity exposure of 25,000 crore or more must share the names and addresses of their ultimate beneficial owners (UBOs), who are the final individuals behind each of the vehicles in an FPI structure.

Based on market sources, these foreign funds’ custodians have told the Securities and Exchange Board of India (Sebi) that current FPIs can lower their interests below the cut-off levels set for deeper examination within three months after notice of the amended rules, instead of the six months originally stated.

The fund industry and custodian circles have also told Sebi that the ‘high-risk’ label should be avoided when categorising FPIs with big assets in the Indian equities market. Custodians are huge banks, primarily multinationals, and local non-banks that operate as fund bookkeepers.

Custodian banks believe that because the funds with larger exposure will continue to trade, three months will be enough time for them to reduce exposures under the new regulatory threshold levels.

The regulatory stance was that NRIs (who had alternative ways to participate directly in the Indian stock market) as a group could not own more than 50% of the fund corpus, and no single NRI could contribute more than 25%.