These proposals are designed to create a more inclusive investment environment, particularly for Indian non-individuals and mutual funds, allowing them to play a more significant 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.
The consultation paper invites public feedback on these suggestions, which could have a substantial impact on the investment landscape.
Key proposals
- Retail Schemes in IFSCs: The proposal suggests 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.
- Alignment of Contribution Limits: SEBI proposes to align the contribution limits for resident Indian non-individuals with the IFSCA (Fund Management) Regulations, 2025. This move would harmonize the contribution thresholds for various types of funds operating within IFSCs, including venture capital, restricted schemes, and retail schemes.
- Indian Mutual Funds as Constituents of FPIs: The proposal seeks to allow Indian mutual funds to become constituents of FPIs, enabling them to invest in overseas mutual funds or unit trusts with exposure to Indian securities. This is intended to streamline the investment process and enhance the transparency of such investments.
Background
Currently, under the SEBI Foreign Portfolio Investors (FPI) Regulations, 2019, resident Indians, including non-resident Indians (NRIs) and overseas citizens of India (OCIs), are restricted from directly registering as FPIs.However, these individuals are allowed to be constituents of FPIs, subject to specific conditions on contribution limits and control within the funds. For resident Indian non-individuals, participation in FPIs is permitted if they meet certain criteria, including the type of funds they manage or sponsor and the contribution limits for specific categories of funds.The consultation paper comes at a time when the government is looking to enhance the role of IFSCs in India’s financial sector, with an eye on attracting more global capital. By proposing to widen the scope for resident Indian participation, SEBI aims to make the FPI route more accessible for a broader range of investors, including mutual funds, which could significantly diversify their foreign investments.
The proposals also reflect an effort to bring Indian financial regulations in line with international standards while fostering a more dynamic and globally connected investment environment.
The consultation process:
The public has been invited to submit comments on these proposals by August 29, 2025, through the SEBI website. SEBI’s move to open up the process for public input underscores the importance of stakeholder feedback in shaping policies that affect both retail and institutional investors.
The consultation process will likely influence the final regulatory framework and could signal a shift towards more liberalized foreign investment rules for Indian participants.
With the introduction of these measures, the Indian investment community is poised to see significant changes that could reshape the way FPIs operate within India, offering new avenues for growth and diversification in the global markets.
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