SEBI mulls allowing FVCI infrastructure investments

In a paper released this week, the regulator said its proposals were aimed at removing any hindrance for foreign investors looking to get exposure to Indian infrastructure sector through the FVCI route.

Under present rules, CICs - which hold their assets as investments in the form of shares but do not carry out any financial activity - must register as a non-banking financial companies (NBFC) once their assets size exceeds INR1 billion ($16 million).

Aside from a handful of exceptions, FVCIs are generally barred from investing in NBFCs. However, Sebi has said that as CICs are holding companies and do not engage in financing activity akin to NBFC, so the proposals are necessarily at odds with current regulations. 

"The proposal is expected to infuse funds into the infrastructure sector which is crucial for development of the country and has vast positive spillover effects over various other sectors and the entire economy," said SEBI. "This proposal to allow investment by FVCIs in CICs investing in infrastructure companies has also been endorsed by the Government of India and Reserve Bank of India (RBI)."

Indian infrastructure is in dire need of investment if the country is the realise its economic ambitions. A recent report published by Deloitte estimates that a sum equivalent to around 10% of GDP must be sunk into the asset class over the course of the 12th Five-Year Plan (covering 2012-17) in order to achieve a 9% real GDP growth rate. This is amounts to INR65.7 trillion (about $1 trillion) at current prices.

SEBI's proposals are open to public comments till November 15.

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• Topics
• South Asia
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• regulation
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• SEBI