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20 Jul 2012 10:00 AM
MF industry feels relaxed QFI norms for debt funds will have little impact 
Pallabika Ganguly
 

QFIs can invest $1 billion without any lock-in period.

SEBI in consent with RBI has allowed QFIs to invest in Indian corporate debt securities and debt schemes of Indian mutual funds without any lock-in period, said a circular issued by SEBI yesterday. The regulator has capped the investment at $1 billion. This limit shall be over and above the limit of $ 20 billion for FII investment in corporate debt and shall be monitored by the regulators.

 But AMCs do not have too much expectation from the relaxation of norms for investment in debt mutual fund.

 “It’s a welcome step but we need to wait and watch how many QFIs are willing to take exposure in mutual fund debt market as currency risk and tax issues are two major factors that makes these funds unattractive for QFIs,” said Vijai Mantri, MD and CEO Pramercia AMC.

According to current regulations, QFIs are allowed to invest in schemes of Indian mutual funds and Indian equity shares by opening a demat account with a qualified Depository Participant (DP).

The circular further added that, this set of overseas investors can invest without prior approval until the aggregate investments reaches 90% (ninety percent) of $1 billion i.e. $0.9 billion. After the investment reaches 90%, they cannot make any fresh investment without prior approval from the depositories. To get prior approval from the depositories, they need to submit QFI, PAN and other unique identification number relating to that QFI, to the concerned depository.

 But the regulator has restricted the transaction to some debt securities which are as follows:

  1. Purchase and sale of corporate debt securities listed on recognized stock exchange(s);
  2. Purchase of corporate debt securities through public issues, if the listing on recognized stock exchange(s) is committed to be done as per the extant provisions of the Companies Act, 1956;
  3. Sale of corporate debt securities by way of buyback or redemption by the issuer;
  4. Purchase and sale of units of debt schemes of Indian mutual funds.

“The QFIs already have good performing dollar denominated funds in their respective countries so such relaxation in norms will not have a major impact in inflows,” said Akshay Gupta, MD and CEO Peerless Mutual Fund.

DPs will ensure KYC of the QFIs as per SEBI norms. The depositories shall also jointly publish the aggregate investment of QFIs to public on a daily basis.


 
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