Govt to reveal steps to encourage FII investments

The third is the issue of collateral which FIIs have raised. They want treatment at par with domestic institutional investors. Domestic institutional investors can use cash as well as securities as collateral whereas FIIs can use only cash as collateral. The finance ministry is looking at an amendment to Foreign Exchange Management Act (Fema) whereby securities can also be used as collateral.

Apart from that, FIIs raised questions on several macro economic parameters, including current account deficit and the fiscal deficit, on which they have been assured that the government will stick to its roadmap on both.

Over the next one month, some of these steps on currency derivatives as well as collateral will be announced.

FIIs have also sought waiver of the short term capital gains tax, which has been a long pending demand. A decision on that can be taken only in the Budget. Also they have sought clarity on permanent establishments.

Infact, Parthasarathi Shome after his interactions with industry bodies had also asked the Central Board of Direct Taxes (CBDT) to issue a guidance note on this and expect some clarity on whether FIIs can be considered as permanent establishment. A permanent establishment has to pay a higher level of tax.