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India allows direct buying of stocks by foreigners


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This is a relaxation of the earlier restriction - this will allow retail investors to buy in directly through brokerage houses. This is welcome news for many investors around the world.




But, there is some red tape:


The government said QFIs will include individuals, groups or associations, resident in a foreign country that is compliant with anti-money laundering forums such as the Financial Action Task Force and is a signatory to IOSCO's multilateral MoU.


In order to trade, a QFI will have to open a demat and a trading account with a qualified depository participant, and all transactions will have to be through this route. The depository has to ensure that the QFIs meet all know-your-customer ( KYC) and other regulatory requirements. The money will be routed through normal banking channels, with convertible currencies such as the dollar transferred to a depository's rupee pool bank account. Once the funds are received, the depository can carry out the transaction.



Under the arrangement, RBI will grant general permission to QFIs for investment under a portfolio investment scheme route that is similar to FIIs. To begin with, an individual QFI can hold up to 5% in a company, while all QFIs put together can have up to 10% stake. These limits are over and above those prescribed for FIIs and NRIs.


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