Reuters File

Market regulator, the Securities and Exchange Board of India (SEBI) has strongly condemned a body of overseas investor's claim that the tighter KYC Know Your Client - norms would lead to outflows totalling a whopping $75 billion. Earlier in April this year, the SEBI had issued circular introducing the tighter KYC norms for the FPI investors.

In a statement, SEBI said that "It is preposterous and highly irresponsible to claim that 75 billion dollars of FPI investment will move out of the country because of SEBI's circular issued in April 2018."

The SEBI issued the statement as a response to an announcement made by AMRI - Asset Managers Roundtable of India - on behalf of 13 investors including, Morgan Stanley Asset Management, Kotak Mahindra UK, Edelweiss Capital, Enam AMC, Geosphere LLC and AMANSA Capital among others.

Nandita Parker, President, AMRI had said that "The problem is that while the circular was issued to enhance KYC norms, it has instead resulted in restrictions on investments and in some cases, it has even placed a blanket ban on investments through certain FPIs."

SEBI chairman Ajay Tyagi
Securities and Exchange Board of India (SEBI) Chairman Ajay Tyagi speaks at a news conference after its board meeting at SEBI headquarters in Mumbai on April 26, 2017. REUTERS/Shailesh Andrade

A letter was sent to SEBI Chairman Ajay Tyagi on August 29 raised the concern on the issue with a copy to Prime Minister Narendra Modi, Ministry of Finance and the Reserve Bank of India.

The letter had raised serious concern over the proposed tightening of KYC norms and stated "An immediate impact of the circular [if not amended] is that from December 31, 2018 [the date set by SEBI's Circular dated August 21, 2018, for existing FPIs to ensure compliance with the stipulations of the circular], the said $75 billion investment will be disqualified from investing into India and will have to be withdrawn and liquidated within a short time frame, thereby adversely affecting the Indian Markets and Indian currency."

The market regulator on 10th April had issued a circular which stated that the entities like non-resident Indians (NRI), persons of Indian origin (PIO) and overseas citizen of India (OCI) cannot be the beneficial owners (BOs) of any foreign portfolio investor.