New Delhi (Agencies): The government is taking into account a simple and streamlined set of norms for all kinds of overseas investments into capital markets, but wants such foreign investors to undergo a stricter scrutiny process.

The move could facilitate direct investments by both individual and institutional entities abroad into Indian equity and debt markets, as against the present practice of coming through FIIs, venture capital and private equity funds.

However, foreign investors would need to face stringent scanning before being allowed to invest in Indian capital markets as per the proposal, on which the Finance Ministry is seeking feedback from key financial sector regulators such as Sebi and RBI, sources said.

The proposed measures, expected to be declared in the Union Budget later this month, would focus on simplify the process of foreign investment in capital markets and avoid uncertainty, delay or unequal treatment with regard to various investor classes, sources said.

At the same time, the proposals would put a strong emphasis on KYC (know your customer) norms for these investors to prevent any option of illicit wealth coming into the Indian markets, they added.

The steps are also being considered for permitting foreign entities, both individual and institutional, to invest in capital markets here without setting shops here.

Instead, they would be allowed to invest in India after registering with the Indian depository participants existing in their respective counties.

The proposed measures are largely based on recommendations made by a high-powered panel headed by UK Sinha who has now been given charge as chairman of capital market regulator SEBI.

It had proposed that the foreign investors should not be categorised in various classes like FIIs, FVCIs or NRIs and a common set of regulations be formed for them.

The Sinha commission had also advised a single window for registration and clearance of portfolio investment regulations, without distinguishing between investor classes.

Seeking the abolition of foreign institutional investors, foreign venture capital investors and NRIs as separate investor classes, the panel backed a single investor class to be known as Qualified Foreign Investors.

To facilitate the direct investment by overseas entities, the Indian DPs would be encouraged to expand globally by setting up branches or entering into agency ties with authorised entities in foreign countries.

However, these DPs would be needed to follow stringed KYC norms, as prescribed by RBI, SEBI and other regulatory authorities, for registering foreign entities as clients.

Besides, SEBI and all other regulators would be entitled to seek any further information from these investors, whenever they consider it necessary for their surveillance and investigative actions.

As per the proposed measures, any foreign investor would first need to fetch all the KYC documents to the DP branch or agency in that country and the same would be forwarded to the parent entity in India.

After consulting the foreign investment norms of RBI and SEBI applicable to that particular foreign entity, the DP in India would facilitate opening of accounts with a bank and a stock broker. The bank and broker would carry out their own KYC checks on the documents provided by the investor.