Foreign investment norms for stock, debt market relaxed further

NEW DELHI: In a major initiative to attract foreign capital and stabilise rupee, the Government today permitted residents of the Gulf nations and all EU nations to invest directly in stock markets and allowed individual overseas investors to bring up to $ one billion in debt market.

The relaxation in overseas investment norms for individual investors, also known as the Qualified Institutional Investors (QFIs), is aimed at "making QFI scheme more attractive to potential investors and enhance flow of foreign capital into India," the Finance Ministry said.

The government will also clear apprehensions over taxation policies. The Central Board of Direct Taxes (CBDT) will shortly issue clarifications on issues concerning taxation on QFI investments. Although the Finance Ministry has put on hold General Anti-Avoidance Rules (GAAR), there has been apprehensions among the global investors over tax policies, especially after the Budget.

The government had earlier in January allowed QFIs from 34 FATF ( Financial Action Task Force) member countries to invest in the equity market. Following interest shown by investors, the government has expanded the scope of QFIs include six-member Gulf Cooperation Council (GCC) nations and the 27-nation bloc European Union.

"The residents of FATF member countries and those from the countries of the GCC and European Commission would now be eligible to be considered as QFIs", said Thomas Mathew, joint secretary in the Finance Ministry.

The decision to relax the investment norms comes at a time when the government and the Reserve Bank are making efforts to arrest the slide in rupee which touched life time low of 56.38 to a dollar on May 24, mainly on account of withdrawal of funds to the tune of Rs 1,500 crore since April by FIIs. This also led to sharp fluctuations in stock market.