Foreign Portfolio Investors (FPIs) play a vital role in channeling cross-border capital into India’s financial markets. Over the past year, regulatory authorities like SEBI and RBI have implemented several updates to streamline compliance, encourage investment, and promote market stability. This article delves into the latest FPI regulations, examining their implications across equity, debt, and government securities.
Foreign Portfolio Investors—a spectrum that includes mutual funds, pension funds, insurers, and sovereign wealth—help modernize India's stock and bond markets. Recognizing their importance, SEBI (Securities and Exchange Board of India) and RBI (Reserve Bank of India) have been progressively fine-tuning the regulatory framework. The focus has shifted toward:
Risk-based regulation: Prioritizing oversight where systemic risks arise.
Ease of doing business: Reducing red tape to attract long-term capital.
Market stability: Ensuring healthy inflows and protecting investor interests.
Against this backdrop, several reforms in 2024–25 aim to balance robust compliance with investor friendliness.
In April 2025, SEBI amended its Master Circular to raise the disclosure-trigger threshold from ₹25,000 crore to ₹50,000 crore in Assets Under Management (AUM) Sarthak Law+10Nishith Desai Associates+10Securities and Exchange Board of India+10EY+1The Economic Times+1.
Previously, FPIs with large Indian equity portfolios were obligated to disclose ultimate ownership across all natural persons, posing operational burdens. The revised threshold ensures only truly large players—relative to today's ₹122% increase in NSE average daily turnover—must comply.
Lighter compliance for medium-sized FPIs.
Focus on genuine systemic risks, not administrative obligations.
Aligns disclosure norms with India’s evolving market scale.
SEBI extended the deadline for granular disclosures related to Offshore Derivative Instruments (ODIs) from May 17 to November 17, 2025 Nishith Desai Associates.
Introduced in December 2024, these norms targeted ODIs and segregated portfolios. The six-month pushback:
Addresses stakeholder capacity constraints.
Gives custodians and FPIs additional time to build systems.
Reduces risk of rushed submissions.
Enhances accuracy and compliance integrity.
Signals SEBI’s willingness to phase-in reforms pragmatically.
In June 2025, SEBI approved a framework for IGB-FPIs—FPIs investing exclusively in Indian Government Bonds (IGBs) via the Voluntary Retention Route (VRR) or Fully Accessible Route (FAR) The Times of India+5Nishith Desai Associates+5EY+5PwC+1Resolut Partners+1.
Key relaxations include:
🆗 Aligned KYC periodicity with RBI’s framework (2/8/10 years).
❌ No investor group disclosure required.
🤝 NRIs/OCIs/RIIs allowed full contribution/control.
🗓 Larger 30‑day window for material changes (from 7/30 days).
📜 Simplified onboarding/transitions with clear guidelines.
The inclusion of IGBs in global bond indices (JPM, Bloomberg, FTSE Russell) significantly increased foreign interest—nearly 700% between Mar 2021 and Mar 2025 The Times of India+5EY+5Nishith Desai Associates+5Nishith Desai Associates.
More streamlined access for debt-focused FPIs.
Enhanced foreign inflows into sovereign bonds.
Positive macro-economic impact via deeper bond markets.
May 2025: RBI removed short-term maturity caps and concentration limits for FPIs in corporate debt TaxTMI+7Nishith Desai Associates+7KPMG Assets+7The Economic Times+9Reuters+9The Times of India+9.
April 2025: RBI reaffirmed limits for FY 2025‑26—6% for G-Secs, 2% for SGSs, 15% for corporate bonds; thresholds: ₹8.22 trn (Apr–Sep) and ₹8.80 trn (Oct–Mar) Reuters+2Reuters+2KPMG Assets+2.
April 2025 RBI set quarterly bucket ceilings under its Master Direction, and extended CDS notional cap to ₹2,936 bn .
The two-pronged move increases flexibility while keeping macro-level ceilings intact.
Removing restrictions on short-term maturities opens new investment horizons.
Servers to deepen the corporate bond market via greater foreign participation.
Broader investor base and improved liquidity.
Steadier capital inflow, less sensitivity to yield differentials.
FPIs gain freedom for tactical investment and portfolio diversification.
Here’s a streamlined overview of the 2024–25 FPI regulatory changes:
| Area | Reform |
|---|---|
| FPI Equity Disclosures | Disclosure threshold raised to ₹50k crore |
| ODI Filing Deadlines | ODI disclosure implementation postponed to Nov 17, 2025 |
| IGB‑FPI Category | Lighter KYC, no group disclosure, NRIs/OCIs allowed, 30‑day window |
| Debt Market Limits | RBI retains caps; removes short‑term and concentration limits |
| CDS Exposure | Notional limit increased to ₹2,936 billion |
7. 💡 Strategic Implications for FPIs
Only FPIs with ₹50k crore+ equity AUM need deep disclosures.
Exemptions for widely-held ODIs and IGB-FPIs lower costs.
Easier onboarding and KYC processes reduce effort.
Corporate debt becomes more accessible with short-term flexibility.
Highlighted by acceleration into bond indexes and smoother FAR/VRR routes.
No investor-group limits for IGB-FPIs foster broader fund structures.
Control by NRIs/OCIs brings diaspora capital into sovereign debt.
Extended timelines (30 days) reduce administrative burden.
Actions align India with global markets.
Improved liquidity, deeper yield curves, and better investor assurance.
Affirmation that compliance standards are evolving but robust.
Measure exposure: Identify if AUM exceeds ₹50k crore threshold.
Implement ODI systems early: Leverage extra time until Nov 17, 2025.
Update practices: Align with quarterly debt limits and CDS caps.
Opt for IGB-FPI: Announce intent at registration with SEBI.
Revise KYC workflow: Adapt to longer periodicity.
Material updates: Prepare for 30-day disclosures.
Educate stakeholders: Adjust internal controls and custodial agreements.
Broader maturity play: Tap into flexibility in under-1-year bonds.
Scale strategies: No concentration limits = diverse corporate exposure.
Monitor ceilings: Stay updated on quarterly caps and fund usage.
SEBI’s risk-based agenda: Expect more proportionate regulation.
Global index inclusion effects: Focus on sovereign bond participation.
Cross-agency interplay: SEBI and RBI working in sync for coherence.
Digital compliance: Likely enhancements in online filing systems.
Regulations in 2024–25 showcase India’s commitment to refined, investor-friendly markets:
Disclosure norms now apply to genuinely large players.
Debt market access strengthened with caps intact but flexibility expanded.
IGB-FPI framework offers a path for targeted sovereign bond exposure.
FPIs can leverage these reforms to strategically position themselves in India’s growing financial ecosystem. From eased compliance and longer timelines to diversified debt options, this environment supports deeper, more stable foreign capital participation.