Foreign portfolio investors (FPIs) domiciled at the GIFT International Financial Services Centre (IFSC) and registered with the Securities and Exchange Board of India (Sebi) have been allowed to issue offshore derivative instruments (ODIs), popularly known as participatory notes (pnotes).
- At present, the International Financial Services Centre Authority (IFSCA), the unified regulator for GIFT City, allows banking units to issue p-notes.
- P-notes are investment vehicles used by overseas investors to gain exposure to the domestic markets without registering with local regulators.
- They were of immense popularity prior to 2007 when nearly half of the foreign flows came through this route. However, they lost their appeal following tightening of norms around identification of their end beneficiaries and easing of FPI registration norms.
- Currently, p-notes account for around 2 per cent of the total AUC of FPIs.
