Sebi and RBI are working on a more robust system for reporting of trades done by FPIs and ensure compliance with sectoral caps amid confusion over their exposure breaching the 74 per cent limit in HDFC Bank.
A day after allowing FPIs to buy shares of HDFC Bank, the Reserve Bank of India (RBI) on February 17 restored the cap as the exposure crossed the prescribed 74 per cent threshold.
In a rare instance, the ceiling was restored during market hours on February 17 amid overseas entities going on a buying spree of HDFC Bank shares. This has resulted in confusion over execution of trade by some Foreign Portfolio Investors (FPIs) at that time.
The limits on foreign investments in banks are set by the RBI while the trading aspects come under the Securities and Exchange Board of India (Sebi).
Sources said Sebi and RBI are now working on ways to put in place a more stronger system to keep close tab on trading in shares by FPIs, primarily to ensure the relevant sectoral limit for them are complied with.
Currently, FPI exposure to banking companies are capped at 74 per cent.
The confusion related to HDFC Bank shares has thrown up a peculiar situation for the two watchdogs as well as the stock exchanges, which actually enforce the limits and stop foreign entities from buying shares in case the cap is reached.
Sources said in the present case, there is a likely scenario wherein a few trades by FPIs might have already resulted in the 74 per cent being breached.