Foreign Portfolio Investors Allowed to Trade Directly

IAS Prelims 2023

Securities and Exchange Board of India (SEBI) has permitted foreign portfolio investors (FPIs) to trade directly in corporate bonds without any broker.

Currently, FPIs can trade in Indian markets only through brokers who are registered with stock exchanges as their members.

SEBI has amended FPI regulations to allow category I and category II FPIs to have an option to directly access the corporate bond market without brokers, as has been allowed to domestic institutions such as banks, insurance companies and pension funds.

The revised norms will be applicable to category—I FPIs that include sovereign wealth funds and central banks as well as category—II ones that include mutual funds and banks.

However, hedge funds, individuals and other high—risk foreign investors will not get this facility.

Earlier Reforms by SEBI:

SEBI in November permitted FPIs to invest in unlisted corporate debt securities and securitised debt instruments with a ceiling of Rs. 35,000 crore.

Currently, investment made by Sebi—registered FPIs in domestic capital market stands at around Rs. 11 lakh crore. This includes Rs. 8.2 lakh crore in equities and Rs. 2.66 lakh crore in debt.