FIIs meet Finance Ministry officials, pitch for reduction in withholding tax rates.

NEW DELHI: Foreign institutional investors have pitched for a reduction in the withholding tax rates on their investments in Indian debt and simplification of know your customer norms to attract foreign capital into the country.

"FIIs gave their feedback on improving inflows into the debt and equity markets... They made suggestions on reduction in withholding taxes for wider array of instruments and also sought," a finance ministry official said after a meeting called by his ministry.

A 10% withholding tax is applicable on foreign investment in debt, which investors want halved, said an executive with an investment firm who attended the meeting

On November 30, the finance ministry announced two new windows of $ 5 billion each for long-term foreign investors in government securities and corporate bonds taking the overall foreign investment limit corporate debt to $75 billion.

FIIs also wanted further simplification of procedures related to KYC and also sought clarifications on information sharing.

The meeting called by economic affairs secretary Arvind Mayaram was attended by representatives from institutional investors including Goldman Sachs, SBI-Soc Gen Global Securities Services, Nomura, Morgan Stanley, Barclays and Bank of America.

Officials from Sebi and RBI also attended the meeting. The meeting also discussed issues related to investment through the Qualified Foreign Investors (QFI) route.

The QFI route allows a foreign individual, association or trust to invest in equity, debt and mutual funds from 45 countries, including the Gulf. Overseas investors have made net investments of $1.2 billion in the Indian equity market during first week of December.

This takes the net investment by FIIs to $20.9 billion so far in 2012, making it as the second highest net inflow by in a single calendar year since their entry into Indian capital markets in 1992. FIIs, a major participant in Indian stock market, had pulled out $ 358 million in 2011.

However, overseas investors have pulled out a net $ 390 million from the debt market so far this month.


Source : economictimes.indiatimes.com