Clear, consistent framework needed for QFIs: Assocham

Last Updated: Thursday, April 5, 2012 - 21:42

Bangalore: A clear and consistent policy framework is required to iron out multiplicity of regulations for qualified foreign investors (QFIs), industry body Assocham said on Thursday.

QFIs were allowed to participate in mutual fund schemes in August last year. But no investments have yet been made and the route remains non-operational, Associated Chambers of Commerce and Industry of India (Assocham) said in a statement.

QFIs are individuals or organisations, resident in a foreign nation, who are compliant with various anti-money laundering forums.

They have also been allowed to invest in equity markets since January 1. In the Budget for 2012-13, the government announced opening up of corporate bond market as well.

Many QFIs investors are unwilling to obtain a permanent account number and file tax returns in India. "There is also a lack of clarity on which countries will be considered as compliant to the Financial Action Task Force (FATF)," said Secretary Seneral D S Rawat.

There are only 36 members of the FATF at present comprising 34 jurisdictions and two regional organisations. It is not clear whether investors based out of jurisdictions under associate and observer member organisations who are not full members of FATF will be eligible to invest in India.
There are also conflicts between QFI regime vis-a-vis foreign institutional investments and foreign direct investments. For instance, there are sectors in which there are separate limits for FII and FDI under Indian exchange control norms.

As QFI investment will be over and above FII, there is need for clarity if QFIs will cut through the FDI quota or FII participation in such sectors will be reduced, said Rawat.

"There are varying marketing and selling restrictions besides licensing requirements differing across jurisdictions which are quite onerous."

Allowing QFIs to directly invest in Indian equity and bond markets will widen the non-residents investor base in stock markets and expand the set of non-resident portfolio investors amid significant foreign capital outflows.

The government estimates that QFIs will invest USD 50-75 billion in the country's equity and bond markets, Assocham said.


First Published: Thursday, April 5, 2012 - 21:42

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