A government appointed panel has proposed a major restructuring of the regulatory architecture for foreign investments recommending that investment below 10 per cent should be considered as portfolio investment and anything above that should be considered as foreign direct investment.
The proposals are part of the recommendations by The Working Group on Foreign Investment headed by UTI Mutual Fund chairman U.K. Sinha, comprising members of the ministry of finance and the Securities and Exchange Board of India (SEBI).
The panel has also recommended that different categories such as foreign institutional investors (FIIs), foreign venture capital investors (FVCIs) and non-resident Indians (NRIs).
"The working group recommends a single window for registration and administration of portfolio investment regulations, what we call Qualified Foreign Investors (QFI)," said the report. "The QFI framework would cut across asset classes with no distinction made between investor classes. FIIs, FVCIs and NRIs would be abolished as an investor class."
It also called for promulgation of broader know your customer (KYC) requirements that meet Organisation for Economic Co-operation and Development (OECD) standards of best practices.
"These requirements would combine adherence to Prevention of Money Laundering Act ("PMLA") rules and regulations as well as information required for market monitoring by all regulators of financial services into one master file," it said.
The report said there was also a need to closely review sectors where limits set by FDI and portfolio investment policy overlap.