Lok Sabha Question No. 3864 (UNSTARRED), answered on 2017-03-24
Subject: Foreign Institutional Investors
Ministry: FINANCE
Asked by: FEROZE VARUN GANDHI

## MINISTRY OF FINANCE DEPARTMENT OF ECONOMIC AFFAIRS

## LOK SABHA

## UNSTARRED QUESTION NO. 3864

TO BE ANSWERED ON FRIDAY, MARCH 24, 2017 / CHAITRA 3, 1939 (SAKA)

## 'FOREIGN INSTITUTIONAL INVESTORS'

## QUESTION

## 3864:  SHRI FEROZE VARUN GANDHI

## Will the Minister of FINANCE be pleased to state:

- (a) the details of amount invested by Foreign Institutional Investors (FIIs) along with investments made in stock market under Participatory-Notes (P-Notes) during the last three years and the current year;
- (b) whether the Government has any plans to restrict the inflow of money via PNotes into equity markets, if so, the details thereof; and
- (c) the steps taken by the Government to ensure that black money does not get routed through P-Notes into Indian equity markets?

## ANSWER

## MINISTER OF STATE IN THE MINISTRY OF FINANCE (SHRI ARJUN RAM MEGHWAL)

(a)  Net Investment made by Foreign Portfolio Investors (FPIs) [formerly known as Foreign Institutional Investors-FIIs] during last three calendar years and the current year is as below:

|   Year | Net Investments (INR Cr.)   |
|--------|-----------------------------|
|   2014 | 256,213                     |
|   2015 | 63,662                      |
|   2016 | 23,080                      |
|   2017 | 12,367 (upto Feb 2017)      |

The  notional  value  of  outstanding  Offshore  Derivative  Instruments  (ODIs)  [also known as  Participatory  Notes  (PNs)]  during  the  last  three  calendar  years  and  the current year is at Annexure.

(b)  &  (c):  The  Securities  and  Exchange  Board  of  India  (SEBI),  vide  SEBI  (FPI) Regulations, has put in place several measures to prevent the misuse of ODIs route and to identify the beneficial owner of these instruments. Some of the measures are as below:

- i. ODIs/ PNs can be issued only to those entities  which  are  regulated  by  the appropriate regulatory authority in the countries of their incorporation, after compliance with 'Know Your Client' (KYC) norms.
- ii. FPIs  have  to  fully  disclose  information  concerning  PNs/ODIs,  as  and  when and in such form as SEBI may require.
- iii. ODI  subscriber  has  to  be  a  resident  of  a  country  whose  securities  market regulator is a signatory to International Organization of Securities Commission's Multilateral Memorandum of Understanding or a signatory to bilateral Memorandum of Understanding with SEBI.
- iv. ODI subscriber being a bank, has to be a resident of a country whose central bank is a member of Bank for International Settlements.
- v. ODI subscriber should not be a resident of a country identified in the public statement of Financial Action Task Force as a  jurisdiction  having a  strategic Anti-Money Laundering or Combating the Financing of Terrorism deficiencies to  which  counter  measures  apply  or  has  not  made  sufficient  progress  in addressing the deficiencies or has not committed to an action plan developed with the Financial Action Task Force to address the deficiencies.
- vi. ODI issuers are required to provide reports on monthly basis in a prescribed format  containing  information  pertaining  to their ODI  activities in the preceding month by 10th of the subsequent month.
- vii. FPIs are prohibited  from  issuing  PNs/ODIs  to  Resident  Indians/NonResident Indians (NRIs) and they are also required to give an undertaking to this effect.
- viii. SEBI vide circular CIR/IMD/FPI&C/59/2016  dated  June  10,  2016  has streamlined the KYC process wherein FPIs are required to maintain the BO information of its  ODI  subscribers  in  line  with  the  Rule  9  of  PMLA,  i.e.  BO information is to be furnished in case the holding of natural person(s) is above specific  thresholds.  Further  it  has  been  clarified  that  NRI/PIO  cannot  be beneficial owner of an ODI subscriber.

****

## ANNEXURE  REFERRED  TO  IN  PART  (A)  OF  LOK  SABHA  UNSTARRED QUESTION NO. 3864 TO BE ANSWERED ON MARCH 24, 2017

Outstanding Notional Value of Offshore Derivative Instruments (ODIs)

| As on the last day of the Month   | Notional Value of outstanding ODIs on Equity, Debt and Derivatives ( INR cr.)   |
|-----------------------------------|---------------------------------------------------------------------------------|
| Jan-14                            | 163,348                                                                         |
| Feb-14                            | 172,738                                                                         |
| Mar-14                            | 207,639                                                                         |
| Apr-14                            | 187,486                                                                         |
| May-14                            | 211,740                                                                         |
| Jun-14                            | 224,248                                                                         |
| Jul-14                            | 208,284                                                                         |
| Aug-14                            | 211,499                                                                         |
| Sep-14                            | 222,394                                                                         |
| Oct-14                            | 265,675                                                                         |
| Nov-14                            | 249,210                                                                         |
| Dec-14                            | 236,677                                                                         |
| Jan-15                            | 268,033                                                                         |
| Feb-15                            | 271,752                                                                         |
| Mar-15                            | 272,078                                                                         |
| Apr-15                            | 268,168                                                                         |
| May-15                            | 284,826                                                                         |
| Jun-15                            | 275,436                                                                         |
| Jul-15                            | 272,053                                                                         |
| Aug-15                            | 253,310                                                                         |
| Sep-15                            | 253,875                                                                         |
| Oct-15                            | 258,287                                                                         |
| Nov-15                            | 254,600                                                                         |
| Dec-15                            | 235,534                                                                         |
| Jan-16                            | 231,317                                                                         |
| Feb-16                            | 217,740                                                                         |
| Mar-16                            | 223,077                                                                         |
| Apr-16                            | 212,132                                                                         |
| May-16                            | 215,338                                                                         |
| Jun-16                            | 210,731                                                                         |
| Jul-16                            | 212,179                                                                         |
| Aug-16                            | 216,232                                                                         |
| Sep-16                            | 212,509                                                                         |
| Oct-16                            | 199,987                                                                         |
| Nov-16                            | 179,648                                                                         |
| Dec-16                            | 157,306                                                                         |
| Jan-17                            | 175,088                                                                         |