To invite greater participation from foreign investors, the government has relaxed the client-verification requirement under the Prevention of Money Laundering Act for them.
As per the govt notification, overseas investors, who want to put money in the depository receipts of Indian companies, now would not need to do any separate KYC process.
They are allowed to buy depository receipts of Indian companies based on the proof of identity they have established with authorities in their country of origin.
The decision will help local firms looking to raise capital from overseas investors, who often complain about the presence of too many processes.
This will pave the way for fresh issue of depository receipts, as per ET report.
In August, Finance Minister Nirmala Sitharaman had said depository receipts scheme of 2014 would be operationalised soon by SEBI, to enable local companies to access foreign funds through American Depositary Receipts (ADRs) and Global Depositary Receipts (GDRs).
The govt had also allowed the issue of unsponsored depository receipts. Though, SEBI has its concern over allowing unsponsored receipts. It plans to come up with implementation guideline soon.
As per experts, the changed rule would work well for the listing of depository receipts in western markets.
Finance Minister, during her maiden budget speech, had marked that the government will relax KYC norms for FPIs, and merge non-resident Indian (NRI) portfolio investment scheme route to encourage them to invest more in Indian capital market.
It also plans to organise a meet for global investors and get global industrialists, corporate leaders, sovereign and venture funds on a single platform. The govt is working with the Reserve Bank of India and SEBI to introduce relevant measures.
India aims to be a $5 trillion economy, and it cannot achieve that without inviting heavy investment and making Indian market overseas investor-friendly.