India received its First Investment through Qualified Framework Investor Route worth $ 5m

Following the deal struck by Kotak Mahindra Bank worth $5 million India received its first investment through the qualified framework investor (QFI) route. The deal formally put an end to speculation that India’s attempt to get investors to buy shares directly will go kaput.

Kotak Mahindra Bank has concluded the deal worth $5 million for a US-based client, said a finance ministry official. The scheme to attract investment through the Qualified Framework Investor route is expected to attract investment worth about $30 billion in 2012-13 period thereby helping the country fund a chunk of the current account deficit pegged at 4.2% of GDP in 2011-12.

The finance ministry had in the recent past conducted road shows in five countries in the Gulf region--Riyadh, Dubai, Muscat, Kuwait and Bahrain - to project India as the incredible investment destination for wealthy investors.

Qualified Foreign Investors (QFI): A person or a trust resident in a country which is a member of the Financial Action Task Force (FATF) can invest directly in India. Such a person or trust is termed as Qualified Foreign Investors.

Investment Regime for QFI (QFI): QFIs have been permitted to invest in all the three segments of the Indian Capital Market namely- Mutual Funds (MFs), Equity and Corporate Debt.

Reason why Government is promoting QFI route: The wealthy investors, the finance ministry felt should be encouraged to invest directly so that the stable in-flows could fund the current account deficits