The Securities and Exchange Board of India (Sebi) will ensure that foreign portfolio investors (FPIs) are able to access their funds on the day of the settlement when the shorter T+1 cycle comes into effect from September 9, said Sebi whole time member Ananth Narayan on September 3
While speaking at the CII Financing 3.0 Summit in Mumbai, Narayan said that currently FPIs are not able to access their funds on T+1 and instead have to wait for T+2, T+3, or even beyond for their funds.
The reason for the delay is a delay in receiving the tax certificate, said Narayan.
“After the settlement was done, the custodian would send a list of the transactions to the tax consultant, who would then take of a day to give the tax incidence to the FPI. After this only, the FPI would be in a position to draw out funds,” said Narayan.
Narayan said that all this process could be done on T+1 itself.
He, however, said that there has been some noise in the market that settling funds on T+1 will lead to an increase in custodian charges.
Narayan further added that when remittance of funds was delayed, it led to a huge opportunity loss for FPIs. While it was a loss for the FPIs, the custodians were gaining from the float which stayed back for an extra day with them.
“So, it was a non-transparent, opaque, implicit charge as opposed to explicit fees for the custodian,” said Narayan whole adding that hidden and opaque charges should be converted into transparent charges so it is leads to ease of doing business for FPIs.
What else is in pipeline?
Sebi is also creating an online tracker for FPIs, so they can see where their application is stuck, said Narayan.
The regulator is also trying to see if they can make the registration process simpler for FPIs who only invest in government bonds, he added.
The whole-time member also said that Sebi wants to make life easier for FPIs where it believes that an FPI doesn’t require to disclose too much of information. Examples of these FPIs are government-owned entities, insurance companies, pension funds, mutual fund like institutions, and others.
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