India Opens Its Doors Wider For NRIs
100 per cent NRI-owned funds allowed to be set up in India's tax haven GIFT City, allowing them to pump more money into stock markets
NRIs can set up their own fund in India's tax haven, the Gandhinagar-based GIFT City, which has been modelled on the lines of Singapore, Hong Kong, Dubai and Mauritius. Before last week, the NRIs and Overseas Citizens of India (OCIs) could not own more than 50 per cent in a foreign portfolio investment (FPI) vehicle. But market regulator Sebi has now relaxed this cap and allowed 100 per cent ownership of FPI funds by NRIs. This will enable NRIs and OCIs to pump in more money into the Indian stock markets. Currently, GIFT City has no tax on equity investments in India since the government is trying to popularise it and compete with Singapore, Mauritius and Dubai.
There is a view that a liberalised regime for NRI/OCIs could lead to twin benefits — boost the fund ecosystem at the GIFT City as well as attract genuine flows from overseas Indians. At present, the combined holdings of NRIs and OCIs in a global fund must be less than 50 per cent, while that of a single NRI or OCI is capped at 50 per cent.
"The SEBI's provision of enhanced flexibility represents a significant milestone in making India's financial markets more accessible to NRIs, OCIs, and RIs. This initiative facilitates their increased participation in FPI located within International Financial Services Centres (IFSCs), effectively simplifying the investment process while simultaneously enhancing the integrity and attractiveness of our financial landscape. Such a move is anticipated to unlock substantial inflows from the Indian diaspora, which has been keen to engage in India’s growth story but faced limitations due to existing regulations," said Suresh Swamy, Partner, Price Waterhouse & Co LLP.
The Narendra Modi-led BJP government has a huge fan following among the NRIs and Indian diaspora overseas and anticipation is that the move could bring in higher inflow of money.
“The conditions set forth for this increased participation are meticulously designed to balance the need for flexibility with the imperative of managing regulatory risk,” Swamy said.
