PARTICIPATORY NOTES - ECONOMY

News: FPIs domiciled at GIFT City allowed to issue P-notes to investors

 

What's in the news?

       Foreign portfolio investors (FPIs) based at the GIFT International Financial Services Centre (IFSC) and registered with the Securities and Exchange Board of India (SEBI) have been granted permission to issue participatory notes.

 

Participatory Notes:

       Participatory Notes, commonly known as PNs or P-Notes, serve as financial instruments utilized by investors and hedge funds for investing in Indian securities.

       They don't require registration with the Securities Exchange Board of India (SEBI).

 

Characteristics:

1. Offshore Derivative Investments:

       Investments made through Participatory Notes are categorized as offshore derivative investments.

 

2. Issuance:

       Registered foreign Portfolio Investors (FPIs) issue P-Notes to overseas investors who seek exposure to the Indian stock market without undergoing direct registration.

 

3. Anonymity:

       While Foreign Institutional Investors (FIIs) must report all investments each quarter to SEBI, they are not obligated to disclose the identity of the actual investors.

 

Go back to basics:

Foreign Portfolio Investment:

       Foreign Portfolio Investment (FPI) refers to the acquisition and retention of a diverse range of foreign financial assets by investors aiming to invest outside their home country.

 

Investment Instruments:

       FPI encompasses investments in various instruments such as stocks, bonds, mutual funds, derivatives, fixed deposits, etc.

 

Objective:

       Generally, FPI is pursued to inject funds into a foreign country's stock market with the aim of generating swift returns.

 

Regulation in India:

       In India, the regulation of foreign portfolio investment falls under the purview of the Securities and Exchange Board of India (SEBI).