The Securities and Exchange Board of India (Sebi) may not relax the ‘know your customer’ (KYC) norms for qualified foreign investors (QFIs) for investing in domestic mutual fund industry.

Last month, industry chief executives had requested for a relaxation after witnessing no inflows even after five months of the measures taken in August last year.

According to a top chief executive officer, "Sebi says at a time when there are stringent KYC norms for local investors, it would not give a good impression to tweak rules for foreigners."

A QFI is a person resident in a country compliant with Financial Action Task Force (FATF) standards, a signatory to the International Organisation of Securities Commission's multilateral memorandum of understanding. QFIs should not be resident in India or registered with Sebi as a foreign institutional investor or sub-account.

Fund industry executives agree with the regulator's stance on the issue but they said without any dilution in KYC norms, money is clearly not going to come as was anticipated by the government. "Foreign investors are used to a particular operating mechanism overseas. India cannot be that special that we have our own norms," argued one executive.

"If we have to get into their system, we need to tweak our system to come in line with the global norms. Global norms are not going to tweak for a small investment destination like India," he added.

In August, Sebi had issued detailed guidelines to allow KYC-compliant foreign invest-ors, termed as QFIs, to invest in equity and debt schemes.

The objective was to bring stability and depth to the Indian financial markets. However, the stringent KYC norms such as mandatory permanent account number and tax filing details have not gone down well with fund houses.

In the guidelines issued by Sebi, the aggregate investments by QFIs can be up to $10 billion for equity schemes and an additional $3 billion in debt schemes, which invest in infrastructure with a minimum residual maturity of five years.

Further, fund houses can accept subscriptions from QFIs only up to $8 billion in equities and $2.5 billion in debt schemes. The rest would be auctioned by the regulatory through bidding.