Market regulator Sebi on Monday cleared as much as 16 foreign institutional investors' applications and said measures to curb issuance of Participatory Notes are not intended to curb capital inflows coming through the front door.
In a video conference with leading FIIs, Sebi chairman M Damodaran said the market regulator has received lot of responses from both domestic and foreign investors to its proposal early last week to curb inflows through P-Notes.
"We cleared 16 FII applications today... FII applications received till October 17 have been cleared now," he said.
Damodaran also made it clear that there was no proposal to extend the 18-month time-limit provided for FIIs to liquidate their holding of PNs beyond 40 per cent of their asset portfolio.
In all, nine top FIIs attended the interactive video conference on the guidelines, which proposes to restrict inflows to PNs to 40 per cent of each of the FIIs asset portfolio.
He also said proprietary sub-accounts must be registered with the regulator, which will bring out modified regulations on FII registration after October 25.
"We believe, we have adequate responses to take the process (of registering new entities) forward," Damodaran told the conference attended among others by Goldman Sachs, Merill Lynch and Kotak.
Soon after the unveiling of the proposed guidelines last week, the stock market had crashed by 1,700 points only to recover by 1,400 points the same day after Finance Minister P Chidambaram and Damodaran clarified that there was no intention to ban PNs, but only curb anonymous capital flow.
Damodaran emphasised that he wanted FIIs to come through the front door, but said the response has been lukewarm.
The scenario of FIIs now investing in India in some other name will change, he said, adding that the responses to the proposed guidelines were adequate to take the process forward.
With regard to sub-accounts that want to register, Damodaran said the applications should reach within a week and that sub-accounts only for P-Notes trades would not be permitted.
Damodaran also said a single group can register multiple entities in India. He pointed out unregistered PNs were told to wind up as far back as 3-5 years.
Damodaran said the market regulator wanted to expedite the process of registration of unregistered entities and needed details on the time band required.
"It will mull carry-on positions from PNs status to FIIs," he said, adding it was necessary to differentiate between corporate and FII sub-accounts. Damodaran also said Sebi was revisiting the category of entities that seek FII status.
Meanwhile, some of the FIIs which participated in the video conference said it was "satisfactory and cordial" and the proposals in the guidelines were expected to go through.
But some other FIIs said nothing much came out of the interaction and that the SEBI chairman clarified few points and "we will wait and see". A few other FIIs felt that the one-week time to register in the proposed guidelines was adequate.