Russian Banks Collaborate on Ambitious FPI Plans to Invest Private Wealth in India

Russian Banks Collaborate on Ambitious FPI Plans to Invest Private Wealth in India

Ira Singh
3 Oct’23

In a significant development in the world of international finance, several leading Russian banks have announced their intention to pool resources and embark on a large-scale Foreign Portfolio Investment (FPI) initiative targeting India. The ambitious plan seeks to leverage the immense private wealth in Russia for investment in the burgeoning Indian market, fostering closer economic ties between the two nations.

As surplus funds of Russian oligarchs, family institutions and tresuries look for safe avenues to invest, some of the large banks in Russia are exploring stepping in as foreign portfolio investors (FPIs) to trade on Indian stock exchanges, according to sources.

Sources said VTB, Russia’s second largest bank, has approached the Securities and Exchange Board of India (SEBI)to obtain an FPI licence.Since March,three Russian non-bank asset managers have registered themselves as FPIs with SEBI.

VTB is controlled by the government of Russia which has the majority stake in the bank.The proposal relating to VTB’s registration as FPI will also need the approval of the RBI, stated sources.

While applications for new FPI registrations and renewal of existing licences are cleared by the SEBI,a green signal from the central bank is necessary when the applicant for the registration is an overseas bank having a branch office in India.

Other Russian banks with presence in India are Sberbank and Gazprombank.

VTB, thanks to its ownership may qualify for a category I FPI registration which is granted to governments and government-related foreign investors such as central banks and sovereign wealth funds.Category I FPIs can issue and subscribe to overseas derivative instruments(with Indian stocks as underlier), having higher position limits in derivatives and are exempt from tax on indirect transfers, according to information.