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Sebi may ease foreign venture capital investment norms

The Securities and Exchange Board of India (Sebi) is likely to discuss clearing applications through the foreign venture capital investor (FVCI) route when its board meets on October 6.

As many as 80 such applications are pending with Sebi due to the Reserve Bank of India’s reservations on the issue.

Sources familiar with the developments said RBI was not clearing them earlier as there was a need to control the flow of foreign capital. But the situation has changed now, raising hopes that Sebi will resolve the issues with RBI and review the status of the FVCI applications.

A committee of representatives from RBI, Sebi and the finance ministry had looked into the issue sometime back. The market regulator has also received many representations for extending the benefits under the FVCI scheme to private equity investors.

RBI pricing norms related to FDI are not applicable to FVCIs and if their investment is for more than a year, then post IPO lock-in is not applied to them.

The sources said Sebi may not relax the norms for short selling despite demands from market participants. The board will also review the developments in international financial markets.

The US and UK regulators have recently banned short- selling in financial stocks to prevent the market from falling further. Sebi Chairman C B Bhave, however, has made it clear that there is no such move as far as the Indian market is concerned.

Current norms allow only one week for keeping short positions open in the cash segment and suggestions have been made to increase this period of one week.

Sebi is also expected to review the progress of reforms initiated for initial public offers. One issue, which has already completed under the new fast-track system, has received good response from retail investors. The scheme may now be extended to institutional investors also who will now be required to make full payment along with their IPO applications.

If cleared, this will be a major reform in the primary capital market in terms of price discovery.

The Sebi board is also likely to boost the corporate debt market in view of suggestions that foreign institutional investors should have a bigger scope for investing in such instruments. Corporate bond investment limit is part of overall limits within which FIIs can invest in debt instruments. Since the current limit for FIIs for investing in corporate debt has already been exhausted, the board may consider relaxing it in coordination with RBI.

Source: Business Standard

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