BENGALURU (Reuters) – India’s markets regulator on Tuesday proposed tighter disclosures for offshore derivative instruments (ODIs) and said those products can only have cash equity and debt as their underlying exposure.
The Securities and Exchange Board of India (SEBI) in a consultation paper proposed that rules for disclosure of concentrated holdings shall apply to foreigners investing via ODIs, adding that non-compliance with disclosures will require subscribers of such derivative instruments to liquidate within 180 days.
Investors who subscribe to the ODIs will need to disclose their investors in case more than 50% of their assets are invested in a single Indian corporate group, SEBI said.
ODIs are vehicles that allow foreign investors to invest in Indian equities or equity derivatives without registering in the country.
Currently, ODIs can have derivatives as hedges, but SEBI proposes to discontinue this practise. The regulator on Tuesday proposed that such ODIs would need to redeem their investments within one year.
In cases where an ODI is hedged using derivatives, there are concerns regarding multiple levels of leverage, SEBI said, adding that it leads to shifting the leverage from overseas to Indian ecosystem.
SEBI has invited comments on these proposals by Aug. 27.
(Reporting by Nishit Navin and Jayshree P Upadhyay; Editing by Maju Samuel)
