Government and Sebi plans ways to check FPI flows from China
Published On: Monday, May 11, 2020 | By: Team KnowMyStock
After foreign direct investment (FDI), the Indian government is looking to clamp down on unbridled access to the Indian market by Chinese portfolio investors as it seeks to plug a possible loophole that investors from across the border can use to acquire shares in listed domestic companies. The department of economic affairs in the finance ministry is looking at options, including the possibility of mandating the “approval route” for Chinese foreign portfolio investment (FPI) as well. FPI investors typically acquire smaller shares and keep churning their investments. The government will initiate the steps in consultation with markets regulator Sebi.
Sources said that plugging this gap was important as the government wanted to ensure that a group of investors blocked via the FDI route do not use the FPI option to gain significant ownership in a company. Besides, the department for promotion of industry and internal trade (DPIIT) is looking to define “beneficial ownership” of shares in line with the provisions of the Companies Act. So, companies where Chinese citizens own over 10 per cent cannot escape prior government approval even if the funds are coming via a third country such as Singapore or the US.
Tags: FPI flows from China
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