QFIS SCHEME

In the Budget 2011–12, the government, for the first time, permitted qualified foreign investors (QFIs), who meet the know-your-customer (KYC) norms, to invest directly in Indian mutual funds. In January 2012, the government expanded this scheme to allow QFIs to directly invest in Indian equity markets. Taking the scheme forward, as announced in Budget 2012–13, QFIs have also been permitted to invest in corporate debt securities (CDSs) and MF debt schemes subject to a total overall ceiling of US $ 1 billion.

In May 2012, QFIs were allowed to open individual non-interest-bearing rupee bank accounts with authorised dealer banks in India for receiving funds and making payment for transactions in securities they are eligible to invest in. In June 2012, the definition of QFI was expanded to include residents of the member countries of the Gulf Cooperation Council (GCC) and European Commission (EC) as the GCC and EC are members of the Financial Action Task Force (FATF).

The speedier moves in the area of promoting higher foreign investment (FIs) in India should be seen in the light of two broad perspectives, viz.,

(i) India’s rising current account deficit (which crossed an all-time high of

6.7 per cent by March 2013) which is creating heavy drain of foreign exchange; and

(ii) The objective of attracting more FIs while the Western economies are under the spell of recession (cashing in the opprtunity).