SEBI proposes tighter disclosures for offshore derivative instruments

Securities and Exchange Board of India (SEBI) has proposed stricter regulations for offshore derivative instruments (ODIs) in a recent consultation paper. The new rules aim to tighten disclosure requirements and limit the underlying assets of these instruments to cash equity and debt.

Under the proposed guidelines, foreign investors using ODIs would need to disclose concentrated holdings if more than 50 per cent of their investments are in a single Indian corporate group. Non-compliance would necessitate the liquidation of these investments within 180 days.

The proposal also seeks to phase out the practice of using derivatives as hedges within ODIs, mandating their redemption within a year if this practice is involved. SEBI's concerns center around the potential for excessive leverage and its impact on the Indian financial system.

(With Reuters inputs)