The Aryavarth Express
Agency (Gujarat): In a move to lure more foreign capital and non-resident Indian (NRI) investment, India’s market regulator has announced that foreign funds set up at the Gujarat International Finance Tec-City (GIFT City) can accept full investment from NRIs and other Indian-origin citizens.
The Securities and Exchange Board of India (SEBI) unveiled the new norms on Tuesday, further bolstering the Indian government’s efforts to establish GIFT City as a global financial services hub and a “gateway for global capital” into the country.
Under the new rules, foreign portfolio investors (FPIs) and alternative investment funds (AIFs) operating from GIFT City will be allowed to take 100% investment from NRIs, Persons of Indian Origin (PIOs), and Overseas Citizens of India (OCIs). This marks a significant departure from the existing regulations that cap NRI investment in such funds at 25%.
“The Indian government has been promoting GIFT City as a ‘gateway for global capital and financial services for the economy’,” SEBI said in its circular, highlighting the strategic importance of the initiative.
However, to ensure transparency and address concerns over potential market abuse, SEBI has mandated granular disclosures from funds that hold more than 33% of their equity assets under management (AUM) in a single Indian group or have an equity AUM exceeding $3 billion (250 billion rupees) in the Indian markets.
These funds will be required to either submit their investors’ identity documents, such as passports or Permanent Account Numbers (PANs), to SEBI or adhere to the framework set by the International Financial Services Regulatory Authority, which oversees financial services in GIFT City.
The move is expected to significantly boost the appeal of GIFT City for NRIs and overseas Indians, who have long sought greater investment opportunities in their home country. With the new rules, they can now channel their funds into foreign portfolio investors and alternative investment funds based in GIFT City, potentially unlocking a fresh wave of capital inflows into India.
Recognizing the growing prominence of GIFT City, SEBI has also announced measures to strengthen the regulatory framework and prevent market abuse. Asset management companies (AMCs) operating in GIFT City will be required to implement robust mechanisms to prevent front-running, insider trading, and misuse of sensitive information.
“AMCs will also have increased responsibility and accountability for any instance of front-running or market abuse,” SEBI stated, emphasizing the regulator’s commitment to upholding market integrity.
Additionally, SEBI has relaxed the rules on caps for passive funds’ exposure to sponsor group company stocks. The threshold has been increased from 25% to 35%, providing greater flexibility for fund managers while maintaining adequate diversification.
In another investor-friendly move, the regulator has approved the reduction of the minimum ticket size for bonds issued in GIFT City from the current 100,000 Indian rupees (approximately $1,200) to just 10,000 Indian rupees (around $120). This move is expected to enhance the accessibility and attractiveness of bond investments for a wider range of investors.
The slew of measures announced by SEBI underscores India’s determination to position GIFT City as a global financial powerhouse and a preferred destination for foreign and NRI investment. With more than 80 fund managers and commitments of $30 billion already in place, GIFT City is rapidly emerging as a formidable challenger to established financial centers in the region.
As India continues to liberalize its financial sector and implement investor-friendly policies, the stage is set for GIFT City to play a pivotal role in channeling global capital into the country’s burgeoning economy.