Two Russian banks received a foreign portfolio investor license in India in December 2023

As Kommersant learned, in December 2023, two Russian banks received a foreign portfolio investor license in India. The license provides access to the local stock market. Until now, Sberbank, several management companies and a number of citizens have owned it among Russian entities. In conditions of limited access to the stock markets of Western countries, this opportunity allows not only to retain clients, but also to make money on the provision of brokerage services, experts explain.

According to the register on the website of the Indian central depository (National Securities Depository Limited, NSDL), at the end of 2023, two Russian banks received foreign portfolio investor licenses in India (Foreign Portfolio Investor, FPI). In particular, Tinkoff Bank (13th in terms of assets in the Russian Federation) received a license of the second category, and Centrocredit (78th) received a license of the first and second categories.

On January 8, Tinkoff Bank and Centrocredit were unable to respond to Kommersant’s requests. There is no exact information on the website about the date of inclusion in the register, but the licenses expire in December 2026.

Now there are already ten licenses of eight Russian structures and citizens in the FPI register. In the fall of 2023, Sberbank was the first bank to receive a first category license. Licenses are held by the management companies Alfa Capital, Pervaya (see “Kommersant” dated July 1, 2023) and Dokhod, as well as Igor Noskov and Vsevolod Rozanov. US residents have almost 3.5 thousand licenses.

VTB is also in the process of obtaining a license. The first deputy chairman of the bank’s board, Dmitry Pyanov, said in October 2023 that due to the trade imbalance between Russia and India, the issue of “rupee utilization” arises. As the top manager noted, “the issue of temporary investment of rupees is relevant for any agent servicing this foreign trade.”

There are three FPI license categories. The first one is the easiest to obtain. As Alexander Saraev, deputy director for rating activities at Expert RA, explains, it allows you to use soft rules for disclosing beneficial ownership, subscribe to foreign derivatives based on Indian shares, and also receive certain tax benefits.

As Ivan Tikhonenok, head of banking practice at Amond & Smith Ltd, clarifies, FPI of the first category is usually received by government agencies, central banks, sovereign funds and international organizations such as the World Bank and the IMF. “The license provides the opportunity to participate in trading and invest in one of the most dynamically developing financial markets in the world. We are talking about investments in foreign exchange, commodities and other assets,” explained Anatoly Popov, deputy chairman of Sberbank, in 2023.

FPI of the second category is designed for financial institutions – banks, management companies, investment managers and pension funds, notes Ivan Tikhonenok. The third type of license is the most strict, says Alexander Saraev. It is designed for hedge funds and private equity funds, explains Ivan Tikhonenok.

After the introduction of massive, strict sanctions, access of Russian banks and their clients to previously popular markets (including the US, UK, EU, Japan, Singapore) was, if not closed, then greatly reduced.

The Indian market is one of the fastest growing in recent years. According to Bloomberg, in early December the capitalization of the country’s stock market approached $4 trillion, which is the fifth largest in the world.

“The FPI license provides access to operations on the securities market, makes it possible to manage clients’ assets on it, and open direct accounts with Indian brokers and other market participants,” explains Alexander Saraev.

Experts are confident that the number of Russian organizations and citizens receiving FPI licenses will continue to grow.

Olga Sherunkova