India says foreign funds at GIFT City can take full investment from non-resident Indians

FILE PHOTO: A man walks past the Securities and Exchange Board of India (SEBI) headquarters in Mumbai

By Jayshree P Upadhyay

BENGALURU (Reuters) - India's market regulator said on Tuesday that foreign funds set up at GIFT City in Gujarat state can take full investment from non-resident Indians and other Indian-origin citizens.

However, they will need to make granular disclosures about their investors if the fund holds more than 33% of its equity assets under management (AUM) in a single Indian group.

Such disclosures will also be needed in case the fund along with its investor group holds more than 250 billion rupees ($3 billion) of equity AUM in the Indian markets.

The funds will have to either submit their investors' identity documents such as passport or permanent account number (PAN) to the Securities and Exchange Board of India (SEBI) or adhere to the framework set by the International Financial Services Regulatory Authority, which regulates financial services in GIFT City.

The Indian government has been promoting GIFT City as a "gateway for global capital and financial services for the economy".

More than 80 fund managers with commitments of $30 billion and investments of over $2.93 billion have set up funds at GIFT City in the last three years.

The regulator also said that asset management companies (AMCs) should put in place a mechanism to prevent front-running and market abuse.

The mechanism should include enhanced surveillance, internal controls and escalation processes to identify, monitor and address specific types of misconduct, including front-running, insider trading and misuse of sensitive information, SEBI said.

AMCs will also have increased responsibility and accountability for any instance of front-running or market abuse.

SEBI also relaxed rules on caps on passive funds' exposures to sponsor group company stocks.

While existing rules say that no fund house can invest more than 25% of its assets in a group of connected entities, the threshold has now been increased to 35%.

The regulator also approved the reduction of the minimum ticket size of bonds to 10,000 Indian rupees from the current prevailing practise of issuing bonds at 100,000 Indian rupees.

($1 = 83.4190 Indian rupees)

(Reporting by Chris Thomas and Jayshree P Upadhyay; Editing by Sohini Goswami)