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The scheme of Qualified Foreign Investor was initially floated by the Government of India with the Reserve Bank of India (RBI) and Securities and Exchange Board of India (SEBI) in the year 2011 through a Union Budget announcement. This scheme was floated with the objective of infusing more foreign capital in the Indian capital market and also to reduce market volatility since foreign individual investors are considered to be long term investors compared to foreign institutional investors.
This piece of writing talks about meaning, the permitted transactions allowed to the Qualified Foreign Investors and the associated restrictions and limits imposed by the regulating bodies.
Qualified Foreign Investors or popularly called as QFIs[1] are nothing but a sub-set of Foreign Portfolio Investors and include the following:
Is a resident of a country that is signatory of International Organisation of Securities Commissions (IOSCO) Multilateral Memorandum of Understanding (MMoU) or a signatory of a bilateral MoU with Securities and Exchange Board of India (SEBI).
However, QFIs do not include within their ambit Foreign Institutional Investors (FIIs)/ Foreign Venture Capital Investor (FVCI)/ Sub accounts.
In the following transactions, the QFIs have been permitted to enter into transactions:
For the following types of transactions, Qualified Foreign Investors have been restricted by law:
Following are the limitations that have been imposed on the QFIs by the regulatory bodies:
The category of Qualified Foreign Investors has been subsumed in Foreign Portfolio Investors from the time when SEBI (Foreign Portfolio Investors) Regulations, 2014 were introduced by the government. Nonetheless, it is very important for the Indian capital market to have good capital inflow from foreign inflows keeping in mind the needs of growing and emerging India.
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