{"id":28433,"date":"2020-01-28T18:46:05","date_gmt":"2020-01-28T13:16:05","guid":{"rendered":"https:\/\/enterslice.com\/learning\/?p=28433"},"modified":"2021-02-06T17:27:40","modified_gmt":"2021-02-06T11:57:40","slug":"things-you-should-know-before-deciding-to-invest-via-foreign-portfolio-investment-fpi-route","status":"publish","type":"post","link":"https:\/\/enterslice.com\/learning\/things-you-should-know-before-deciding-to-invest-via-foreign-portfolio-investment-fpi-route\/","title":{"rendered":"Things to know before investing via Foreign Portfolio Investment (FPI) Route in India"},"content":{"rendered":"<p class=\"has-drop-cap\">Foreign Portfolio Investment (FPI) is an investment in securities including shares, government bonds, corporate bonds, convertible securities, infrastructure securities and other financial assets by a person outside his country. These non-residents invest in these securities are commonly known as Foreign Portfolio Investors. Foreign Portfolio Investment is the easiest mode of investment in a foreign countries economy for retail investors looking for a quick return and high liquidity. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What is the difference between Foreign Portfolio Investment (FPI) and Foreign Direct Investment (FDI)?<\/h2>\n\n\n\n<figure class=\"wp-block-image is-resized\"><img decoding=\"async\" loading=\"lazy\" src=\"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2020\/01\/FDI-vs-FPI.jpg\" alt=\"difference between Foreign Portfolio Investment (FPI) and Foreign Direct Investment (FDI)\" class=\"wp-image-28465\" width=\"581\" height=\"459\" srcset=\"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2020\/01\/FDI-vs-FPI.jpg 485w, https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2020\/01\/FDI-vs-FPI-300x237.jpg 300w\" sizes=\"(max-width: 581px) 100vw, 581px\"\/><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\">Who is a Foreign Portfolio Investor?<\/h2>\n\n\n\n<p>Foreign Portfolio Investment (FPI) is one of the major routes\nfor foreign investment inflow in Indian economy along with FDI, ECB and\nNRI-PIS. Foreign investors wishing to make onshore investments in Indian\nCapital through FPI route are collectively called Foreign Portfolio Investors\nto simplify compliance requirements and have uniform guidelines. &nbsp;<\/p>\n\n\n\n<p><strong>Foreign\nPortfolio Investor includes:<\/strong><\/p>\n\n\n\n<ul><li>Qualified Foreign Investors (QFIs),<\/li><li>Foreign Institutional Investors (FIIs) and <\/li><li>Sub Accounts <\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">What is the Foreign Portfolio Investment\nframework in India?<\/h2>\n\n\n\n<p>Foreign investors who wish to invest in Indian securities and\nthe capital <a class=\"glossaryLink\"  aria-describedby=\"tt\"  data-cmtooltip=\"&lt;div class=glossaryItemTitle&gt;Market&lt;\/div&gt;&lt;div class=glossaryItemBody&gt;A market is a structured environment, either physical or virtual, where buyers and sellers convene to trade goods and services. This trading hub operates based on the principles of supply and(...)&lt;\/div&gt;\"  href=\"https:\/\/enterslice.com\/learning\/terms\/market\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'>market<\/a> need to obtain Foreign Portfolio Investor (FPI) license in\nIndia as per SEBI (Foreign Portfolio Investors) Regulations, 2014<\/p>\n\n\n\n<p>The license is granted by a local custodian, in its local capacity as DDP (Designated Depository Participant) on behalf of the capital market regulator, the Securities and Exchange Board of India (<strong>SEBI<\/strong><sup><a href=\"https:\/\/www.sebi.gov.in\/\"><strong>[1]<\/strong><\/a><\/sup>) based on its risk profile in any one of the following three categories:<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td>\n  <strong>FPI Category<\/strong>\n  <\/td><td>\n  <strong>Type of Entity<\/strong>\n  <\/td><\/tr><tr><td>\n  <strong>Category I<\/strong>\n  <strong>(Sovereign\n  and International Entities)<\/strong>\n  <\/td><td>\n  Government\n  and Government Agencies,\n  Central\n  Banks, Sovereign Wealth Funds,\n  International\n  or Multilateral Organizations\/Agencies\n  <\/td><\/tr><tr><td>\n  <strong>Category II<\/strong>\n  <strong>(Regulated\n  Entities)<\/strong>\n  <\/td><td>\n  Assets Management Companies, Investment\n  Portfolio Managers, Swap Dealers, Broker-Dealers, Broad-based investment\n  funds such as Mutual-funds and Investment trusts.\n  <\/td><\/tr><tr><td>\n  <strong>Category\n  III<\/strong>\n  <strong>(Unregulated\n  Entities)<\/strong>\n  <\/td><td>\n  It includes\n  investors not covered under Category I &amp; II such as Non-broad-based\n  funds, Hedge funds, family offices, pension funds, university funds, individuals\n  etc.\n  <\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p><strong>To boost foreign investments in India<\/strong> <strong>SEBI issued <\/strong>revised FPI regulations, referred as, <strong>SEBI (FPI) Regulations, 2019<\/strong> on 23 September, 2019,<strong> replacing earlier SEBI (FPI) Regulations, 2014<\/strong> in its attempt to rationalize and simplify the FPI (<strong><a href=\"https:\/\/enterslice.com\/foreign-portfolio-investment-sebi\">Foreign Portfolio Investment<\/a><\/strong>) regime.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What is the impact of new SEBI (FPI)\nRegulations, 2019?<\/h2>\n\n\n\n<p>The new\nregulations have been drafted based on the recommendation of a committee headed\nby former RBI deputy governor H R Khan. The sigfnificant impact of SEBI easing\nthe regulatory framework for foreign portfolio investors under new regulation\ncan be understood from the following changes that came into effect along with\nthe 2019 regulation. These changes include:<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" loading=\"lazy\" width=\"661\" height=\"497\" src=\"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2020\/01\/SEBI-FPI-Regulations.jpg\" alt=\"impact of new SEBI (FPI) Regulations, 2019\" class=\"wp-image-28435\" srcset=\"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2020\/01\/SEBI-FPI-Regulations.jpg 661w, https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2020\/01\/SEBI-FPI-Regulations-300x226.jpg 300w\" sizes=\"(max-width: 661px) 100vw, 661px\"\/><\/figure>\n\n\n\n<p><strong>These changes can be understood in\ndetail as follows:<\/strong><\/p>\n\n\n\n<ol><li><strong>Re-Categorization for FPIs<\/strong><strong> <\/strong><\/li><\/ol>\n\n\n\n<p>Under the newly amended SEBI (FPI) Regulations, 2019, <strong>two categories remain instead of three <\/strong>as\npreviously. Category I has been expanded to include certain regulated funds previously\nregistered under Category II while Category III has been abolished completely\nand its entities moved to Category II. <\/p>\n\n\n\n<p>Simplifying the categories has heavily eased the KYC requirements,\nexempted applicability of Indirect Share Transfer provisions and allowed higher\nposition limits in derivatives.<\/p>\n\n\n\n<ul><li><strong>Removal of Broad-Based Criteria<\/strong><strong><\/strong><\/li><\/ul>\n\n\n\n<p>Previously Category II registration required <strong>fulfillment of Broad-Based Criteria<\/strong>\nwhich has been <strong>removed<\/strong> in the new\nregime. This, apart from giving relief to newly established funds, serves dual advantage\nfor existing funds <\/p>\n\n\n\n<ul><li>First,\nNon-Broad Funds of The Financial Action Task Force (FATF) countries which are\nregulated have become eligible for Category II registration, and<\/li><li>Secondly,\nno more declarations\/undertakings or other compliance obligations regarding\nBroad-Based fund is required hence easing the registration procedure.<\/li><\/ul>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" loading=\"lazy\" width=\"626\" height=\"347\" src=\"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2020\/01\/Removal-of-Broad-Based-Criteria.png\" alt=\"What is Broad-Based Criteria\" class=\"wp-image-28436\" srcset=\"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2020\/01\/Removal-of-Broad-Based-Criteria.png 626w, https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2020\/01\/Removal-of-Broad-Based-Criteria-300x166.png 300w\" sizes=\"(max-width: 626px) 100vw, 626px\"\/><\/figure>\n\n\n\n<ul><li><strong>Restriction of ODI (Offshore Derivative Instruments) to Category-I FPIs<\/strong><strong><\/strong><\/li><\/ul>\n\n\n\n<p>Offshore Derivative Instruments include <strong>Participatory Notes (P-Notes)<\/strong>, <strong>Total\nReturn Swaps<\/strong> and such instruments.<\/p>\n\n\n\n<p>The new regulation has restricted the use of ODIs to\nCategory-I registered FPIs only. Hence regulated funds which are not from FATF\nmember countries and not registered in India under Category-I FPI have been\nprohibited from issuing\/subscribing ODIs. This includes various funds from\nCayman Island, Mauritius and Taiwan.<\/p>\n\n\n\n<ul><li><strong>Eliminated &lsquo;Opaque Structure Removal&rsquo; Mandate<\/strong><strong><\/strong><\/li><\/ul>\n\n\n\n<p>Under previous regulation designated depository participants\n(DDPs) were supposed to ensure that FPIs did not have &ldquo;opaque structure&rdquo;. This\ncondition has been removed to prevent unnecessary regulatory requirements and\nsimplify compliance framework as &lsquo;<strong>SEBI\nKYC circular issued on 21 September 2018&rsquo; <\/strong>already ensured that FPIs provideinfo ontheir beneficial owners &ndash; be it on ownership or control <a class=\"glossaryLink\"  aria-describedby=\"tt\"  data-cmtooltip=\"&lt;div class=glossaryItemTitle&gt;Basis&lt;\/div&gt;&lt;div class=glossaryItemBody&gt;In finance, the &amp;quot;basis&amp;quot; is a term with several applications, including representing the difference between the spot price and the future contract price of an asset, which is vital in investment(...)&lt;\/div&gt;\"  href=\"https:\/\/enterslice.com\/learning\/terms\/basis\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'>basis<\/a>.<\/p>\n\n\n\n<ul><li><strong>International Financial Services Centre (IIFC) can register as FPI<\/strong><strong> <\/strong><\/li><\/ul>\n\n\n\n<p>Investment managers who want to invest in India through FPI\nroute can do so to benefit from direct and indirect tax incentives available to\nIFSC entities <\/p>\n\n\n\n<ul><li><strong>Revised Registration Fee<\/strong><strong><\/strong><\/li><\/ul>\n\n\n\n<p>FPIs (Foreign Portfolio Investors) registering with SEBI need\nto pay a one-time registration fee for a validity of 3 years. The revised structure\nis as follows <\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" loading=\"lazy\" width=\"567\" height=\"229\" src=\"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2020\/01\/Revised-Registration-Fee.jpg\" alt=\"Revised Registration Fee\" class=\"wp-image-28437\" srcset=\"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2020\/01\/Revised-Registration-Fee.jpg 567w, https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2020\/01\/Revised-Registration-Fee-300x121.jpg 300w\" sizes=\"(max-width: 567px) 100vw, 567px\"\/><\/figure>\n\n\n\n<p>Foreign\nPortfolio Investors registered after 23<sup>rd<\/sup> September 2019 (date when\nthe new regulation came into effect) have to pay as per revised fee structure.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Other Amendments<\/strong><\/h2>\n\n\n\n<ul><li><strong>Registration of Foreign Central Banks as FPIs: <\/strong>Foreign Central Banks can now directly register themselves as FPI in India. They don&rsquo;t need to be resident of a country whose Central Bank is BIS (Bank for International Settlement) member. This change aims to attract more overseas funds.<\/li><li><strong>Offshore Mutual Funds to be FPIs: <\/strong>Existingoffshorefundswhichhave been established by Indian mutual fund houses have been instructed to register themselves as FPIs by the end of March 22, 2020.<\/li><li><strong>Surrender of Registration: <\/strong>FPI is deemed to have surrendered its registration to SEBI if <ul><li>FPI doesn&rsquo;t pay the requisite fee to SEBI after expiration of 3 years post-registration, or<\/li><li>Does not hold any securities or cash balance<\/li><\/ul><\/li><\/ul>\n\n\n\n<p>Designated Depository Participant (DDP) will proceed to\nimplement the surrender of registration after obtaining the SEBI approval in\nsuch cases.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What is process to file for registration as\nForeign Portfolio Investor (FPI)?<\/h2>\n\n\n\n<p><strong>Step 1: Appointment\nof Tax Advisor and Domestic Custodian<\/strong><\/p>\n\n\n\n<p>Both of the appointments should be made such that the\nappointed entities are recognized by the market regulator (SEBI). Domestic\nCustodian works as custodian of the securities traded in by the investing\nentity.<\/p>\n\n\n\n<p><strong>Step 2: Application\nto DDP\/Local Custodian<\/strong><\/p>\n\n\n\n<p>A Designated Depository Participant (DDP) has to be chosen to\nget registered as FPI. One needs to fill Form A and file the same before the\nchosen DDP along with the prescribed fees. <\/p>\n\n\n\n<p><strong>Step 3: Evaluation\nof the Application<\/strong><\/p>\n\n\n\n<p>Once the application is received by the Securities and\nExchange Board or the designated depository participant they can ask for\nappearance or production of documents for clarification or further information\ncollection. In case of any dissatisfaction in respect of the content the\napplication might be rejected, however not before the applicant is given an\nopportunity to represent and explain its case.<\/p>\n\n\n\n<p><strong>Step 4: Acceptance\nof Application<\/strong><\/p>\n\n\n\n<p>Once the DDP\nis satisfied with the content of the application, it grants the certificate of\nregistration, after collecting the prescribed fee, as provided under &lsquo;Form B of\nFirst Schedule&rsquo;. Post which the application if forwarded to SEBI, which\ndisposes of the application within 30 days of receiving it. If any further\ninformation is furnished, then the period is counted from that date.<\/p>\n\n\n\n<p><strong>Step 5: Post Registration\nRequirements<\/strong><\/p>\n\n\n\n<p>Once registration\nis granted, FPI has to appoint a &lsquo;designated bank&rsquo; (authorized by RBI), a\ntrading member &ndash; to execute trades, a clearing member &ndash; for confirmation of\ntrades and a compliance officer &ndash; for taking care of compliances issued by the\nBoard (SEBI) or the Central Government.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Conclusion<\/h2>\n\n\n\n<p>Foreign Portfolio Investment is one the most accessible routes for small and retail investors living outside India, to invest in India and take benefit from its economic growth. Indian market also capitalizes on this influx of fund and hence it is beneficial for economy too. Keeping this aspect in mind the Government of India through the market regulatory body SEBI has made the process of investment via FPI route easier and more streamlined. The regulatory framework is now more investment friendly and offers various advantages to any foreign individual\/entity investing as Foreign Portfolio Investor in India.<\/p>\n\n\n\n<div class=\"read\"><p><b>Also, Read:<\/b> <mark><a href=\"https:\/\/enterslice.com\/learning\/inbound-and-outbound-investments-in-india\/\">Inbound and Outbound Investments: A Quick Overview\n<\/a><\/mark>.<\/p><\/div>\n","protected":false},"excerpt":{"rendered":"<p>Foreign Portfolio Investment (FPI) is an investment in securities including shares, government bonds, corporate bonds, convertible securities, infrastructure securities and other financial assets by a person outside his country. These non-residents invest in these securities are commonly known as Foreign Portfolio Investors. Foreign Portfolio Investment is the easiest mode of investment in a foreign countries [&hellip;]<\/p>\n","protected":false},"author":29,"featured_media":28440,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[2218],"tags":[],"acf":{"service_id":"209"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v14.6.1 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Before Deciding to Invest via Foreign Portfolio Investment (FPI) Route<\/title>\n<meta name=\"description\" content=\"Foreign Portfolio Investment (FPI) is one of the major routes for foreign investment inflow in Indian economy along with FDI, ECB and NRI-PIS.\" \/>\n<meta name=\"robots\" content=\"index, follow\" \/>\n<meta name=\"googlebot\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<meta name=\"bingbot\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/enterslice.com\/learning\/things-you-should-know-before-deciding-to-invest-via-foreign-portfolio-investment-fpi-route\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Before Deciding to Invest via Foreign Portfolio Investment (FPI) Route\" \/>\n<meta property=\"og:description\" content=\"Foreign Portfolio Investment (FPI) is one of the major routes for foreign investment inflow in Indian economy along with FDI, ECB and NRI-PIS.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/enterslice.com\/learning\/things-you-should-know-before-deciding-to-invest-via-foreign-portfolio-investment-fpi-route\/\" \/>\n<meta property=\"og:site_name\" content=\"Enterslice\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/enterslice\" \/>\n<meta property=\"article:published_time\" content=\"2020-01-28T13:16:05+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2021-02-06T11:57:40+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2020\/01\/Foreign-Portfolio-Investment-FPI.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"670\" \/>\n\t<meta property=\"og:image:height\" content=\"352\" \/>\n<meta name=\"twitter:card\" content=\"summary\" \/>\n<meta name=\"twitter:creator\" content=\"@enterslice\" \/>\n<meta name=\"twitter:site\" content=\"@enterslice\" \/>\n<!-- \/ Yoast SEO plugin. -->","authorName":"Vikalp Mishra","authorImageUrl":"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2020\/01\/Vikalp-Mishra.jpg","authorDescription":"Vikalp is NLU graduate from Patiala (Punjab) and has a Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata. He specializes in Corporate Law, IPR and has fair share of litigation practice under his belt. Other facets of him are voracious reader, health freak and avid traveler. To him content writing comes naturally in effort to simplify the law for general public\/reader.","postViews":667,"readingTime":5,"nextPost":{"id":28451,"slug":"rules-of-tax-on-pf-withdrawal"},"prevPost":{"id":28412,"slug":"role-of-mfis-in-rural-and-small-scale-sector"},"featuredMediaUrl":"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2020\/01\/Foreign-Portfolio-Investment-FPI.jpg","postTerms":"Foreign Portfolio Investment","_links":{"self":[{"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/posts\/28433"}],"collection":[{"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/users\/29"}],"replies":[{"embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/comments?post=28433"}],"version-history":[{"count":0,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/posts\/28433\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/media\/28440"}],"wp:attachment":[{"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/media?parent=28433"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/categories?post=28433"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/tags?post=28433"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}