Summary of this article
Sebi proposed major FPI framework overhaul to simplify registrations and unify rules
New rules tighten disclosures, KYC norms, and compliance for all FPIs
Public feedback invited on draft circular until December 26, 2025
The Securities and Exchange Board of India (Sebi) on December 5, 2025 proposed a comprehensive overhaul of the foreign portfolio investor (FPI) framework to simplify registrations, unify rules under a single updated Master Circular, and tighten disclosure and compliance requirements.
In a consultation paper issued on December 5, Sebi said it plans to bring together all circulars issued since May 2024 and withdraw the earlier Master Circular, where required. The regulator said the new framework aims to “enhance ease of doing business and ease of compliance” by simplifying language, removing duplication, and updating transitional provisions.
Beyond ease of doing business, the draft lays out detailed processing norms for custodians and designated depository participants (DDPs), including due diligence, country-of-residence checks, verification of Permanent Account Number (PAN) applications, and eligibility tests.
On non-individual FPIs, the paper mandates active Legal Entity Identifier (LEI) codes, with accounts to be blocked for fresh purchases if codes lapse. The circular also codifies procedures for reliance on scanned documents and digital signatures in line with the Information Technology Act, 2000.
A key section clarifies rules around contributions from non-resident Indians (NRIs), overseas citizens of India (OCIs), and resident individuals. It sets limits on how much they can invest, along with control conditions and reporting requirements.
Sebi said that any FPI breaching these norms will be “prohibited from making any fresh purchase of securities” and may be required to liquidate holdings within stipulated time frames.
The draft circular also proposed protections for government-securities-only FPIs (GS-FPIs) and set separate frameworks for entities, such as pension funds, banks, reinsurance companies, and applicants based in International Financial Services Centres (IFSCs). IFSC applicants will face additional disclosure requirements, including conditions related to pooling, diversification, and control.
On disclosures, Sebi has proposed an updated Know Your Client (KYC) regime, including beneficial-ownership identification, documentation for high-risk jurisdictions and periodic reviews. Custodians and DDPs are required to maintain systems, manuals and reporting formats, while publishing investor charters and complaint disclosures on their websites.
The regulator is seeking public feedback on the same until December 26, 2025.
