- In response to tighter restrictions affecting operations, the RBI has proposed that investments of more than 50% of Alternative Investment Funds (AIFs) units by a person residing outside of India be classified as indirect foreign investment.
Current Regulatory Landscape:
- Regulatory Ambiguity: Recent regulatory remarks have generated uncertainty in the market, notably about Foreign Direct Investment (FDI) policies surrounding AIFs, causing investors to reassess fund deployment methods.
- Changing posture: The regulatory posture has shifted, with modifications in 2015-16 permitting AIFs to receive foreign money automatically, encouraging onshore management, and motivating Indian fund managers to move to India.
Offshore Alternatives:
- Reasons for Offshoring: Offshore funds benefit from a more stable regulatory framework, however tax consequences necessitate careful structure.
- Gujarat International Finance Tec-City (GIFT City) has developed as an appealing option for managers owing to regulatory stability, tax breaks, and closeness to India.
Source: https://www.sebi.gov.in/sebi_data/meetingfiles/apr-2024/1713324885850_1.pdf