BNY Mellon seeks liberal DR norms for investment

MUMBAI: The government needs to review the depository receipt (DRs) regulations if it wants the country to remain a top investment destination as current curbs limit foreign investment in domestic equities, global investment firm BNY Mellon has said.

"We are in talks with regulators like Reserve Bank, Securities and Exchange Board of India ( Sebi) and government officials to review depository receipt regulations and possible introduction of over-the-counter non-capital raising ADRs," BNY Mellon Vice President Neil Atkinson told reporters here.

"We discussed the merits of this proposal and how it might benefit India and its corporates with the authorities. We recommend that companies be given permission to establish non-capital raising DR programmes to trade over-the-counter in the US," Atkinson said.

In permitting OTC non-capital-raising DRs, India would join 67 other countries that provide investors with access in this way, including Brazil, South Korea, South Africa and Turkey, he said.

The government's drive to lure investors from overseas received a boost in 2012 with the adoption of the qualified foreign investor initiative, but to remain one of the world's top investment destinations, the nation should review its depositary receipt (DR) regulations, according to a BNY Mellon report, titled 'India: Easing Conditions for Investors' said.

"We recognise the investor demand for Indian equities that cannot be met through the current routes of QFIs, FIIs, offshore derivative instruments, ETFs or mutual funds. We believe that some of this demand can be met through DRs", the report said.

DRs are negotiable securities that generally represent shares of a non-US company's equity. DRs can trade on all US stock exchanges, other international exchanges and in the over-the-counter market, and can be used to raise capital.