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SEBI has proposed significant changes to allow resident Indian non-individuals and mutual funds greater participation in the Foreign Portfolio Investors framework, especially within International Financial Services Centres. The regulator plans to enable retail schemes sponsored or managed by resident Indians in IFSCs to register as FPIs, with a 10 percent contribution limit in certain funds. Additionally, overseas mutual funds could include Indian mutual funds as constituents. The proposals seek to expand the existing FPI participation rules that currently restrict resident Indians and NRIs from registering as FPIs, aiming to foster increased investment flexibility and growth in international investment structures.
The Securities and Exchange Board of India (SEBI) has put forward a proposal aimed at increasing the involvement of resident Indians in the Foreign Portfolio Investors (FPIs) framework. The regulator suggests broadening the participation of Indian non-individuals and mutual funds within international investment structures. This move includes enabling retail schemes based in International Financial Services Centres (IFSCs) in India, where resident Indian non-individuals act as sponsors or managers, to register as FPIs. Advertisement
SEBI also recommends replacing the terminology "sponsor or manager" for IFSC-based FPIs with "Fund Management Entity (FME) or its associate" to better reflect the evolving investment landscape. According to the proposal, resident Indian non-individuals serving as FMEs or their associates in Alternative Investment Funds (AIFs) and retail schemes in IFSCs could contribute up to 10 percent of the fund's corpus or assets under management in retail schemes. Moreover, overseas mutual funds or unit trusts that register as FPIs may be permitted to include Indian mutual funds as their constituents.
Currently, the FPI Regulations do not allow non-resident Indians (NRIs), Overseas Citizens of India (OCIs), or resident Indians to register as FPIs. They can only be constituents of FPIs within specific contribution and control limits. Resident Indian non-individuals, similarly, can be constituents of FPIs but under certain conditions and investment caps.
The regulator has invited public feedback on these proposals until the end of August, signaling its intention to refine and possibly expand the framework for greater inclusion of Indian participants in global investment flows.
Historically, SEBI has taken steps to streamline and encourage foreign investment participation in Indian markets. This latest move could open new avenues for Indian entities, particularly those based in IFSCs such as GIFT City, to engage more actively in cross-border investment opportunities, potentially boosting capital inflows and enhancing market depth.
Source PTI
5th Jun, 2025
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