Sebi Proposes Major Overhaul to Simplify Rules for Foreign Investors
India’s market regulator, the Securities and Exchange Board of India (Sebi), has unveiled a proposal for a major revamp of the rules governing Foreign Portfolio Investors (FPIs). The plan aims to significantly simplify the registration process and ease compliance burdens for global funds looking to invest in Indian markets. This initiative is part of a broader push to enhance India’s appeal as an investment destination.
Streamlining Registration and Compliance
The core of Sebi’s proposal involves creating a unified rulebook for FPIs. Currently, regulations for these investors are spread across multiple circulars and guidelines, which can create complexity. A single, consolidated framework would make it much easier for foreign funds to understand and follow the rules. This clarity is expected to reduce operational hurdles and legal uncertainties.
Furthermore, Sebi has proposed an abridged or simplified application form for related entities. For example, large global asset managers often operate multiple funds under a single umbrella. The new system would allow such related funds to register more quickly by relying on the common information already submitted by the parent entity. This move directly targets the duplication of effort and paperwork that has been a point of friction for big investment firms.
Clearer KYC and Beneficial Ownership Rules
A key focus of the consultation paper is to bring greater clarity to Know Your Customer (KYC) and beneficial ownership norms. Sebi intends to align these requirements more closely with standards set by the Financial Action Task Force (FATF), an international watchdog. The goal is to prevent the misuse of the FPI route while ensuring genuine investors face a smooth process.
The regulator is also proposing to simplify the broad-based criteria for fund registration. This refers to the requirement that a fund must have a certain number of investors to qualify as an FPI. By making these criteria clearer, Sebi hopes to eliminate ambiguity and make it easier for new funds to enter the Indian market without compromising on regulatory oversight.
Boosting India’s Investment Appeal
This regulatory overhaul is seen as a strategic move to improve the ease of doing business for foreign capital. A simpler and more predictable regulatory environment is crucial for attracting long-term portfolio investments. These investments are a vital source of capital for Indian companies and help deepen the country’s financial markets.
The proposals come at a time when India is seeing strong inflows from foreign investors and is being increasingly included in global bond indices. By streamlining procedures, Sebi aims to lock in this momentum and position India as a more competitive market compared to other emerging economies. The consultation process is now open for feedback from market participants before the rules are finalized.
