FPIs face scrutiny as custodians label Mauritius high risk

Several global custodian banks have classified Mauritius as a ‘high-risk jurisdiction’ for Indian inflows as regulatory scrutiny intensifies in the country. Foreign funds set up through these custodians will face enhanced compliance requirements as a result.

- Pavan Burugula

Mauritius’ importance as a jurisdiction for Indian investment is significant, with foreign funds from the nation holding Indian securities (including debt and equities) worth ₹3.4 trillion as of 30 April, data from depositories showed.

Following the release of the Hindenburg report on Adani Group, which named certain Mauritius-based foreign portfolio investors (FPIs), most custodian banks have raised the risk status of Mauritius.

The report has also sparked a broader discussion in India about the opaque structures employed by a few Mauritius-based entities. Indian regulators have also turned wary of some Mauritius-based investors. Most recently, the government published a list of 21 countries whose investors were exempt from paying angel tax. Mauritius was not part of the list, even though it is a major source of foreign investment in India.

An email sent to Mahen Kumar Seeruttun, minister of financial services and good governance of Mauritius, on Thursday, remained unanswered.