Govt, RBI to fast-track foreign inflows

New Delhi: To attract greater foreign capital inflows through Alternative Investment Funds (AIFs), the government is considering changes to the foreign exchange regulations to make such investments a seamless affair.

AIFs were set up in 2012 by Sebi as a new class of investment entity. The funds are incorporated in India for the purpose of pooling in capital from Indian investors however government wants even foreign investors can invest in the AIFs.

Accordingly, the Finance Ministry plans to move the Cabinet to provide for an enabling provision in the Foreign Management (Permissible Capital Account Transactions) Regulations, 2000 ensuring the foreign investment in AIF is compliant with the FDI policy.

AIFs -- which include private equity, venture capital and hedge funds -- are regulated by Sebi, but the Foreign Exchange Management regulations are governed by the RBI. These funds have been consistently gaining traction since coming into play in late 2012 and there were 135 AIFs registered with Sebi as on March 31, 2015 and collectively they committed Rs 22,600 crore worth of funds.

While Sebi has made provisions in its norms for AIFs to collect funds from the foreign investors, there is no enabling provision under the FDI policy or in the Foreign Exchange Management Act. The changes are aimed at removing anomalies like, under Foreign Exchange Management Regulations, only Sebi registered overseas venture capital investor allowed to invest in the fund. While FDI policy opposes FDI in any trust other than foreign venture capital investors.