SEBI relaxes KYC norms for foreign investors

In a bid to attract foreign investors to Indian capital markets, stock market regulator SEBI eased registration and disclosure norms for low-risk foreign investors and exempted low-risk overseas entities from onerous paper work.
SEBI has formed 3 categories which classifies foreign investors eligible to make portfolio investments in the country as per their risk profile. They are:

  • Category I: Government and other sovereign entities, it is the lowest-risk category.
  • Category II: Well-regulated entities such as mutual funds, insurers, investment trusts, banks, university funds and pension funds.
  • Category III: Corporate bodies, individuals and family offices.

Those with low-risk profile, the Know Your Client (KYC) requirements, which entail submission of various documents and disclosures to get registered and operate in Indian markets, would be relaxed.
SEBI has also exempted Category I investors from submission of documents such as financial statements and board resolution papers, while their top management, partners, directors, trustees and authorised signatories would not be required to submit proof of identity, proof of address and photographs.
In addition, such entities would be exempted from submission of the list, identity proof, address proof and photographs for their ultimate beneficial owners.

Why has SEBI taken measures to ease KYC norms?

The central objective behind SEBI relaxing KYC norms for low risk investors is to make it easier for the foreign investors to enter the country’s market and make decisions. The step has been taken at a time when concerns are being raised about outflows of foreign capital and weakening of the rupee against the dollar and other foreign currencies. SEBI is hopeful that these measures will attract more capital towards India.



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