Market players suggest that the move could be specifically aimed
at vetting applicants from China wanting to register as FPIs.
The Securities
and Exchange Board of India (Sebi) has asked designated depository
participants (DDPs) to refer all applications for new FPI registrations coming
from the neighbouring countries to the regulator for approval.
Market players suggest that the move could be specifically aimed at vetting applicants from China wanting to register as FPIs and may have been prompted by the controversy surrounding the recent increase in stake in HDFC by the People’s Bank of China (PBoC). At present, there are 16 FPI investors coming from China, of which 15 hold Category-I licence.
At present, DDPs
grant licences to investors based on the criteria laid down by the regulator
but do not have to take prior approvals for grant of licence.
In a letter
written to DDPs on Monday, the regulator has said Sebi permission will be
required for granting licences if the FPI applicant or its beneficial owner is
from India’s neighbouring countries.
Such countries
include the likes of China, Pakistan, Nepal, Sri Lanka, and Bangladesh.
With stock prices
crashing, there have been apprehensions that Chinese companies, both private as
well as public, are ramping up investments in companies across the world.
According to
reports, several European countries such as Italy, Spain, and Germany have
tightened FDI rules to prevent hostile takeover of their companies by Chinese
entities.
Chairman Deepak
Parekh, however, has clarified that PBoC has been buying stake in HDFC for the
last two years and that the purchase was not for the Chinese apex bank itself.
