New Delhi: The Finance Minister, P. Chidambaram, has announced that the Securities and Exchange Board of India (SEBI) could, if obligatory, provide over 18 months for foreign institutional investors (FIIs), which have issued Participatory Notes (PNs) based on derivatives to chill out their positionings.

In a televised investor meeting at New York on Thursday, Mr. Chidambaram said, “It is in consultation with them (FIIs), not necessarily consent, we announced that they will have to wind down P-notes issued over derivatives over a period of 18 months. SEBI has reserved the right to extend that (18 months) if necessary.”

SEBI setting aside the right to lengthen the wind down phase further than 18 months was not openly remarked in the discussion paper released on Tuesday.

Expressing that only a small FIIs part, out of the more than 1,000 filed in India, are expected to be impacted by the future measures, Mr. Chidambaram told that only a handful of FIIs who manage Participatory Notes upon derivatives.

The Finance Minister also guaranteed FIIs that the administration had no other criterion under thought to restrain capital inflows above and beyond those on offshore derivative instruments declared by SEBI early this week.

To moderate capital inflows and slowdown the use of PNs, SEBI on Tuesday proposed certain measures that would require FIIs to wind down on certain kind of PNs, which are based on derivatives, and capped PNs as proportion of assets under custody to 40 per cent. Mr Chidambaram said that the SEBI board would meet on October 25 to approve these proposals in the form of regulations.

The Finance Minister also assured FIIs that he would advise SEBI to call a meeting of all potential FIIs and explore ways for simplifying the process of registration for such institutional investors.

A few of the FIIs argued that putting 40% limit on the assets under hold would hold back their admission to the Indian capital market.

A FII spokesperson said, “It will trim flows to the country.”

In the meantime, the CPI(M), a key supporter of the UPA administration, on Friday sought a full ban on participatory notes (PNs), telling that financial entities, which are indisposed to meet up revelation norms should not be permitted to take part in the Indian capital markets.

A statement issued by the CPI(M) Polit Bureau said, “The CPI(M) is of the firm opinion that PNs should be prohibited, as has been recommended by the RBI.”

It also desired the Government to go in the direction of, isolating the financial system from speculative capital inflows. The authorities should actualize that the surge in FII inflows, boosted by rupee admiration and interest rate increases can ultimately have grave implications, the statement said.