FIIs unshackled

The Securities and Exchange Board of India’s (SEBI) proposed move to allow foreign institutional investors (FII) to put up Indian government securities, mutual fund units and other domestic financial assets as collateral against their market obligations, on par with domestic investors, is a welcome step. Currently, FIIs are permitted to post only cash and foreign sovereign securities with AAA rating as collateral to the exchanges for trading in derivatives, while they can also submit domestic government securities for transactions in the cash segment of the market. The latest SEBI proposal basically places them on an equal footing with domestic investors, thereby removing an unnecessary deterrent to FII investments in Indian equity markets. A recent survey by the International Organisation of Securities Commissions, representing capital market regulators from different countries, reveals that global institutional investors prefer to invest in jurisdictions that accord them the same treatment as local investors.


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