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FM supports new SEBI measures

NEW DELHI: Finance Minister P. Chidambaram on Friday said he favoured the steps taken by the Securities and Exchange Board of India (SEBI) on the issue of tightening norms for Participatory Notes (P-Notes) to control capital inflow without hurting the investment sentiment.

Speaking on the issue a day after the market regulator SEBI announced new tightened norms for P-Notes, Mr. Chidambaram said it was important to control capital flows but without hurting investment. “I have stated that one of the concerns is very sharp increase in capital flows. Without hurting investments, we will like to take some measures to moderate the inflows. Some measures have been taken by SEBI. We will have to wait and see what impact do they have,” he told newspersons on the likelihood of the impact of these measures on the inflow of foreign institutional investor (FII) funds.

At the same time, Mr. Chidambaram refused to answer repeated queries on whether the Reserve Bank of India or the Government would take some more steps to moderate capital flows.

When asked about a resurgence of the stock markets, the Finance Minister said: “We cannot be expected to take stock of the stock market every day.”

The benchmark equity index Sensex regained the 19,000 level on Friday on brisk buying activity.

Mr. Chidambaram said the idea of SEBI’s move on P-Notes was to moderate capital flows.

As a by-product, SEBI also achieved the objective of greater transparency. SEBI on Thursday announced new rules that prohibit FIIs and their sub-accounts from issuing fresh derivatives-based P-Notes and require them to wind up current positions in 18 months.

It also imposed curbs on P-Notes in the spot markets by limiting them to 40 per cent of assets under custody of FIIs.

Besides, SEBI also made registration of FIIs and their sub-accounts permanent and they would not have to renew it after every three years as is the case now.

The market regulator also allowed unregulated pension funds, education funds and others to register as FIIs.

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