RBI WANTS CHECK ON SHORT-TERM FII FLOWS

Reserve Bank of India (RBI) has urged the Government to review Fema Regulations to check volatility on account of short term portfolio inflows. Liberal provisions for Foreign Institutional Investment (FII), were ushered in to respond to a particular macro-economic condition that has changed now. Liberal norms for FII inflows leave the door open for investments through Participatory Notes (PNs) and sub-accounts that have been questioned by the security apparatus due to lack of information about source of funds and identity of investors. RBI has warned that FIIs would be the first to pull out their investments in case the economy slows down.