Summary of this article
Sebi has proposed changes to FPI regulations to encourage more resident Indians invest globally.
Retail schemes in IFSCs with Indian sponsors may soon be allowed to register as FPIs.
The cap on contributions by Indian non-individuals could be increased to 10 per cent.
Indian mutual funds may be permitted to join overseas FPIs under set conditions.
The Securities and Exchange Board of India (Sebi) is planning to increase participation of resident Indians in the foreign portfolio investment (FPI) space. In a consultation paper published on August 8, the regulator outlined several key proposals aimed at increasing the involvement of Indian investors in FPIs. The proposals seek to create a more inclusive investment environment and to help Indian non-individuals and mutual funds play a stronger part in investing overseas. In the paper, the regulator said the objective is “to facilitate participation by resident Indians in FPIs.”
As per the proposals, retail schemes based in International Financial Services Centres (IFSCs) with resident Indian non-individuals as sponsors or managers would be allowed to register as FPIs. At present, FPIs are meant for foreign investors, and Indian entities in IFSCs cannot register as FPIs if they have Indian owners.
Retail schemes under IFSCA rules will be required to have at least 20 investors, with no single investor holding more than 25 per cent of the scheme, and cannot invest more than 10 per cent of their assets in a single company.
Sebi has also proposed to align the contribution limits for resident Indian non-individuals with IFSCA’s rules. Currently, Sebi’s FPI regulations cap contributions at 2.5 per cent or 5 per cent depending on the category of the fund. The proposal would raise this to “10 per cent of the corpus of the fund (or AUM in case of retail schemes).” The eligibility requirement would also change from “Sponsor or Manager” to “Fund Management Entity or its associate” for IFSC-based FPIs.
Another proposal would allow Indian mutual funds to be constituents of FPIs, including overseas mutual funds or unit trusts that invest in Indian securities. Sebi said, “It is proposed that overseas MF/UT registering as FPI may be permitted to have an Indian mutual fund as a constituent” in line with conditions set out in its November 2024 circular.
Sebi has invited public comments on these proposals until August 29, 2025. The regulator says these changes, if implemented, “could avoid compliance-related issues” and give Indian investors and fund managers greater access to international markets.
