In a consultation paper released recently, the the Securities and Exchange Board of India (SEBI) has outlined several key proposals that are aimed at increasing the involvement of Indian investors in the Foreign Portfolio Investors (FPIs) framework.
This has been done as an attempt to facilitate greater participation from resident Indians in the FPI landscape.
Designed to create a more inclusive investment environment, particularly for Indian non-individuals and mutual funds, these proposals would allow this category of investors to play a more important role in international investment schemes.
The proposed measures focus on expanding the scope of Foreign Portfolio Investment (FPI) participation by resident Indians through a series of regulatory changes. SEBI's move is expected to pave the way for a broader range of investment options and offer Indian investors increased opportunities to diversify their portfolios globally.
In the consultation paper, SEBI has recommended enabling retail schemes based in International Financial Services Centres (IFSCs) in India, with resident Indian non-individuals acting as sponsors or managers, to register as FPIs.
These schemes would be aligned with existing investment regulations for better clarity and accessibility.
SEBI proposes to align the contribution limits for resident Indian non-individuals with the IFSCA (Fund Management) Regulations, 2025. This proposal would help to harmonize the contribution thresholds for various types of funds operating within IFSCs, including venture capital, restricted schemes, and retail schemes.
Further, the proposal seeks to allow Indian mutual funds to become constituents of FPIs. This would enable them to invest in overseas mutual funds or unit trusts with exposure to Indian securities. This aim of this receommendation is to streamline the investment process and enhance the transparency of such investments.
The present SEBI Foreign Portfolio Investors (FPI) Regulations (2019) restrict resident Indians, including non-resident Indians (NRIs) and overseas citizens of India (OCIs), from directly registering as FPIs.
They are, however, allowed to be constituents of FPIs, subject to specific conditions on contribution limits and control within the funds.
The resident Indian non-individuals are allowed participation in FPIs, only if they meet certain criteria, which include the type of funds they manage or sponsor and the contribution limits for specific categories of funds.
SEBI’s proposal to expand the scope for resident Indian participation seeks to make the FPI route more accessible to a wider set of investors, including mutual funds, potentially enabling greater diversification of their overseas investments.