Investment by Qualified Foreign Investors (QFI) in Indian Corporate Debt
Summary
This SEBI circular permits Qualified Foreign Investors (QFIs) to invest in Indian corporate debt securities and mutual fund debt schemes. It establishes a total investment ceiling of USD 1 billion, with automatic approval up to 90% and depository approval required thereafter. The document outlines monitoring mechanisms, KYC requirements, and reporting obligations for Depository Participants.
Text
The QFI transactions shall be limited to the following debt securities: i. Purchase and sale of corporate debt securities listed on recognized stock exchange(s); ii. Purchase of corporate debt securities through public issues...; iii. Sale of corporate debt securities by way of buyback or redemption...; iv. Purchase and sale of units of debt schemes of Indian mutual funds.
The provisions relating to FIIs in case of non-listing of “to be listed” corporate bonds within fifteen days as per SEBI circular CIR/IMD/FIIC/18 /2010 dated November 26, 2010, shall be applicable to QFIs.
QFIs are permitted to invest in corporate debt securities (without any lock-in or residual maturity clause) and mutual fund debt schemes subject to a total overall ceiling of USD 1 billion.
QFI can invest without obtaining prior approval until the aggregate QFI investments reaches 90% (ninety percent) of USD 1 billion i.e. USD 0.9 billion.
The depositories shall administer and monitor, so as to ensure, that aggregate investment of all QFIs shall not be more than 90% of the investment limit.
The depositories shall jointly publish/ disseminate the aggregate investment of QFIs to public, on daily basis.
When the aggregate investments of all the QFIs reaches 90% of the investment limit... no fresh purchases shall be allowed without prior approval of the depositories.
For fresh purchases by QFIs after the investment limit reaches 90%, prior approval of the depositories shall be obtained. The QFI shall make such request... specifying therein the name of the QFI, PAN and other unique identification number...
After market hours, the depository shall give approval to request for purchase on a first-come-first-served basis in co-ordination with the other depository... The validity of the approval shall be for the next trading day only.
In case the aggregate shareholding of the QFI exceeds overall investment limit, the depositories shall jointly notify the respective DPs regarding the breach along with the names of the QFI due to whom the limits have been breached.
In case the aggregate shareholding of the QFIs exceeds overall investment limit... the QFI due to whom the limit is breached shall mandatorily divest excess holdings within three working days of such breach being notified by depositories to the DP.
DPs will ensure KYC of the QFIs as per the norms prescribed by SEBI... AD Category banks will also ensure KYC of the QFIs for opening and maintenance of the single non-interest bearing Rupee Accounts as per the extant norms prescribed by RBI.
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Source: SecMarx — Investment by Qualified Foreign Investors (QFI) in Indian Corporate Debt. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.