SEBI revises P-note norms

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Mumbai, Oct 6 (UNI) In an attempt to revive capital inflows after sharp losses, the Securities and Exchange Board of India (SEBI) today removed some curbs on indirect investments in shares by foreign portfolio investors.

SEBI will remove restrictions on issuing participatory notes (P-notes), where the underlying asset is a derivative, its Chairman C B Bhave told reporters after the markets had closed.

P-notes are issued by foreign funds registered in India to unregistered overseas investors.

It also scrapped a rule, which said P-notes could only account for up to 40 per cent of the value of assets held by a foreign fund.

''The entire framework for FII participation needs to be reviewed,'' Mr Bhave said. ''The curbs were no longer considered necessary,'' he said.

SEBI also eased some of the restrictions imposed on Foreign Institutional Investors at its board meeting today, in an effort to bolster capital inflows.

The market regulator announced that the restrictions on offshore derivative instruments (ODIs) will be removed. The 40 per cent cap on ODIs in both cash as well as derivative contracts will be lifted.

In October last year, the regulator put curbs on them to help the government keep track of foreign flows into the country.

FIIs were earlier barred from owning more than 40 per cent of their assets in P-notes and were asked to unwind certain holdings within 18 months.

In October 2007, SEBI had placed a ban on either fresh issuance or renewal of PNs by foreign portfolio investors or their sub-accounts in cases where the underlying Indian securities were derivatives.

These investors were then directed to wind up their current position over 18 months. It was also decided then to cap the percentage of PNs or offshore derivative instruments (ODIs) outstanding at 40 per cent of the total assets, under custody of a registered foreign portfolio investor.

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