Investors Corner

FPI stands for Foreign Portfolio Investor. In India, the term "Foreign Portfolio Investor" refers to FIIs or their sub-accounts, or qualified foreign investors (QFIs).

Under the SEBI FPI Regulations, 2014, Foreign Institutional Investors (FIIs), Sub Accounts (SA) and Qualified Foreign Investors (QFIs) were merged into a single category, referred to as FPIs.

For more information on FPI, please refer at the following links: click here

FPIs are segregated into two categories based on SEBI FPI Regulations, 2019.

Category I

(i) Government and Government related investors such as central banks, sovereign wealth funds, international or multilateral organizations or agencies including entities controlled or at least 75% directly or indirectly owned by such Government and Government related investor(s).

(ii) Pension funds and university funds.

(iii) Appropriately regulated entities such as insurance or reinsurance entities, banks, asset management companies, investment managers, investment advisors, portfolio managers, broker dealers and swap dealers.

(iv) Entities from the Financial Action Task Force member countries or from any country specified by the Central Government by an order or by way of an agreement or treaty with other sovereign Governments

• I. Appropriately regulated funds.
• II. Unregulated funds whose investment manager is appropriately regulated and registered as a Category I foreign portfolio investor. Provided that the investment manager undertakes the responsibility of all the acts of commission or comission of such unregulated fund.
• III. University related endowments of such universities that have been in existence for more than five years.

(v) An entity (A) whose investment manager is from the Financial Action Task Force member country and such an investment manager is registered as a Category I foreign portfolio investor; or (B) which is at least seventy-five per cent owned, directly or indirectly by another entity, eligible under sub-clause (ii), (iii) and (iv) of clause (a) of this regulation and such an eligible entity is from a Financial Action Task Force member country: Provided that such an investment manager or eligible entity undertakes the responsibility of all the acts of commission or omission of the applicants seeking registration under this sub-clause.

Category II

Includes all the investors not eligible under Category I foreign portfolio investors such as –

• Appropriately regulated funds not eligible as Category-I foreign portfolio investor.
• Endowments and foundations.
• Charitable organisations.
• Corporate bodies.
• Family offices.
• Individuals.
• Appropriately regulated entities investing on behalf of their client, as per conditions specified by the Board from time to time.
• Unregulated funds in the form of limited partnership and trusts.

FPI should be

• A person not resident in India.
• A resident of a country whose securities market regulator is a signatory to International Organization of Securities Commission's (IOSCO) Multilateral Memorandum of Understanding (Appendix A Signatories) or is signatory to bilateral Memorandum of Understanding with the SEBI.
• Resident of a country whose Central Bank is a member of Bank of International Settlements (BIS) in case of Bank applicant.
• Legally permitted to invest in securities outside its home country.
• Authorized by its Constitution documents / agreement to invest on its own behalf or on the behalf of its clients.
• A fit and proper person based on the criteria specified by SEBI; and
• Grant of certificate to the applicant is in the interest of the development of securities market.
• FPI should also have sufficient experience, good track record, is professionally competent, financially sound and has a generally good reputation of fairness and integrity.

FPIs can trade on the following products which are currently being offered at GIFT based exchanges

• Equity Index Futures & Options.
• Commodity Futures & Options.
• Global Currency Futures & Options.

Yes, SEBI vide circular no. SEBI/HO/CDMRD/DMP/CIR/P/2017/106 Dated. September 26, 2017 has allowed FPIs to participate in commodity derivatives contracts traded exclusively in exchanges set up at IFSC (International Financial Services Centre). For more info: Click here

Following are the benefits which a FPI can avail while trading in GIFT based exchanges

• NO Security Transaction Tax (STT)
• NO Commodity Transaction Tax (CTT)
• NO Capital Gain tax
• NO Stamp duty
• 22 hours access - opportunity to react to change through investment / hedge / arbitrage across globe and asset class.
• Competitive pricing compared to leading global exchanges.
• Capital conservation – single market access across products with cross margin benefits.
• Comprehensive price and transaction data available real time.

Yes, GIFT based exchanges provides Direct Market Access (DMA) to FPIs

SEBI, vide circular no. MRD/DoP/SE/Cir-7/2008 dated April 03, 2008 introduced Direct Market Access (DMA). Further, SEBI vide circular no. MRD/DoP/SE/Cir-03/2009 dated February 20, 2009 permitted institutional investors to use DMA through their Investment Managers also. Please refer to the below link for more information Click here

Yes, India has a DTAA with almost 88 countries. All the DTAA related benefits which FPIs are availing in Indian based exchanges will also be applicable for their trading in GIFT based exchanges.

No, the role of the local custodian is only to monitor compliance for their respective FPIs. As FPIs shall be required to ensure clear segregation of funds and securities, such FPIs shall keep their respective custodians informed about their participation in IFSC.

For more information please refer SEBI Circular at the following link: Click here

No prior approvals are required for FPI to trade on any of the abovementioned products. However, the Trading Member are required to upload the Unique Client Code (UCC) of the EFIs before commencement of trading.

For more information please refer SEBI Circular at the following links: Click here

All the contracts listed in GIFT based exchanges are in USD and settlements are also being done in USD.

No, there is no capital account restriction applicable at the exchanges operating in International Financial Services Centre (IFSC).