The board of Securities and Exchange Board of India, which met on Monday, has doubled the threshold assets under management (AUM) of foreign portfolio investors who need to make additional disclosures, to ₹50,000 crore.
This means that only those FPIs holding more than ₹50,000 crore of equity AUM in the Indian markets will now be required to make additional disclosures. This is a significant easing in regulations for foreign investors.
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Currently, under the Prevention of Money Laundering Act, all FPIs holding more than ₹25,000 crore of equity AUM in the Indian markets are required to disclose details of all entities holding any ownership, economic interest, or control, on a full look-through basis, without any thresholds.
This specific requirement was to guard against any potential circumvention of Press Note 3 stipulations by large-sized FPI with the potential to disrupt the orderly functioning of markets by their actions.
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The existing process for the appointment of PIDs, which requires prior approval of SEBI but not that of shareholder approval will continue
Cash equity trading volume
The decision by the SEBI board to double the threshold was in recognition of the huge surge in the cash equity trading volumes. The limits were set in FY23 and as the regulator has pointed out, trading volumes in the cash equity market have doubled since then.
The board, however, has not changed the criteria of requiring a FPI holding more than 50 per cent of its equity AUM in a single corporate group to make disclosures under the additional disclosure framework.
All FPIs have to be in compliance with the PMLA norms.