A United States custodian is calling for India to relax rules that determine how investors gain exposure to Indian companies.
BNY Mellon says that by permitting over-the-counter, non-capital-raising depositary receipts, India would make it easier for foreign investors to gain access to the country and encourage foreign investment.
“There is significant international demand for Indian equity in the form of depositary receipts that simply cannot be satisfied via the routes now available,” says Gregory Roath, BNY Mellon’s Asia-Pacific head of depositary receipts.
Depositary receipts for 13 Indian companies are currently listed on the New York Stock Exchange. The receipts represent securities on India's stock exchanges and are popular among investors who do not have the local custody capability to invest directly in Indian companies.
Depositary receipts for a number of other Indian companies are available on other global exchanges.
Roath says BNY Mellon is often asked by US investors to create depositary receipts for other Indian companies, but says it is restricted from doing so by current regulations.
“Many investors prefer the familiarity and convenience of depositary receipts, are unable to invest directly, or are unable or unwilling to use derivatives,” he says.
By allowing over-the-counter, non-capital-raising depositary receipts, India would join a list of 67 countries that already permit the practice, including Brazil, South Korea and Turkey, says BNY Mellon.
BNY Mellon says it met India's Ministry of Finance, the Securities and Exchange Board of India and the Reserve Bank of India to discuss the proposal.
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