Budget proposes simple KYC norms for FPIs, higher public holding limit

Finance Minister Nirmala Sitharaman on Friday proposed various measures such as easing of KYC norms for foreign portfolio investors and allowing the listing of social enterprises and voluntary organisations to enhance participation in the capital markets.

Presenting her maiden budget, Sitharaman said steps need to be taken to bring capital markets closer to people and proposed raising the threshold for minimum public shareholding from 25 per cent to 35 per cent.

She said a number of steps would be taken in consultation with the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (Sebi) to deepen the corporate bond market.

Announcing measures related to capital markets, Sitharaman said investments by FIIs and FPIs in debt securities would be allowed to be transferred and sold to domestic investors in a timely manner and also proposed FPI investment in debt securities issued by NBFCs.

"It is proposed to permit investments made by FIIs/FPIs in debt securities issued by Infrastructure Debt Fund – Non-Bank Finance Companies (IDF-NBFCs) to be transferred/sold to any domestic investor within the specified lock-in period," she said.

She said a harmonised and hassle-free investment environment needs to be provided to foreign portfolio investors and KYC norms for them would be rationalised and simplified to be made more investment-friendly, without compromising on the integrity of cross-border capital flows.

The finance minister further proposed to "initiate steps towards creating an electronic fundraising platform – a social stock exchange - under the regulatory ambit of SEBI for listing social enterprises and voluntary organisations working for the realisation of a social welfare objective so that they can raise capital as equity, debt or as units like a mutual fund".

Saying that it is important to get retail investors to invest in treasury bills and securities issued by the government, she said: "inter-operability of RBI depositories and Sebi depositories is necessary for seamless transfer of treasury bills and the government will take necessary measures in this regard in consultation with the RBI and the Sebi".

She further noted that the government is contemplating organising an annual Global Investors Meet in India, using National Infrastructure Investment Fund (NIIF) as the anchor, to get all three sets of global players -- top industrialists/corporate honchos, top pension/insurance/sovereign wealth funds and top digital technology/venture funds.

Among other proposals, she said NRI portfolio route would be merged with the FPI route for seamless investment in stock markets.

Traders welcomed the proposal on corporate tax in Budget, as per which the annual turnover limit of companies has been raised from Rs 250 crore to Rs 400 crore for availing lower corporate tax rate of 25 per cent.

The proposal would cover 99.3 per cent of the companies operating in the country, she said and added that only 0.7 per cent of the companies will now remain outside the 25 per cent corporate tax bracket.

Meanwhile, the Budget has streamlined Securities Transaction Tax (STT) as the STT for exercised options will now be applied only to the difference between settlement and exercise price.

"I propose to give relief in levy of Securities Transaction Tax (STT) by restricting it only to the difference between settlement and strike price in case of exercise of options," Sitharaman said.

"That's a relief since now traders won't have to be worried about compulsorily squaring off in-the-money options before expiry!," TradingBells CEO and Co-founder Amit Gupta said.