The SEBI notified the FPI Regulations in January, 2013, to subsume the FII and the QFI routes of foreign investment into India to form a new category of investment into India termed as the 'foreign portfolio investment' or FPI route.

Recently, in March 2014, the FPI scheme also received the blessings of RBI, which issued a circular under the FEMA Regulations, replacing the Portfolio Investment Scheme for FIIs and QFIs with the 'Foreign Portfolio Investment' scheme, for those entities registered as FPIs in accordance with the SEBI FPI Regulations. However, there appear to be s igni f icant differences between the SEBI FPI Regulations and the RBI notification with respect to investment restrictions. While the SEBI Regulations provides that an FPI can invest in securities in both primary and secondary markets in listed and to be listed companies, the RBI notification seems to suggest that FPI s can purchase shares and convertible debentures which are only "offered to the public in terms of relevant SEBI guidelines/ regulations." The language used in the RBI notification clouds investments by FPIs in preferential allotment and QIPs of listed companies, which under existing laws are technically not 'offers to public. 'One hopes that these differences will be ironed out sooner rather than later, as uncertainties may affect foreign investments.

The FPI Regulations has shifted the onus of registering FPIs from SEBI to Designated Depository Participants (DDPs) and operational guidelines have been notified to facilitate registration of FPIs by DDPs. However, SEBI has recently issued a notification specifying that the FPI regime shall commence from June 1, 2014 and that SEBI would continue accepting all applications for registration of FIIs and sub-accounts till May 31, 2014. Interestingly, the 1995 SEBI FII Regulations have been repealed by the FPI Regulations and all investments by FIIs and sub-accounts will now be governed by the FPI Regulations even though the FPI regime will only commence from June 1, 2014. This will cause some confusion.

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Date:September 28, 2015