Easing Regulations for Indian Residents to Join Foreign Portfolio Investments (FPIs) Proposed by the Securities and Exchange Board of India (SEBI)

Easing Regulations for Indian Residents to Join Foreign Portfolio Investments (FPIs) Proposed by the Securities and Exchange Board of India (SEBI)

The Securities Exchange Board of India (SEBI) has recently unveiled a series of measures aimed at broadening and simplifying investment options for Indian investors in foreign funds, particularly focusing on International Financial Services Centres (IFSCs) and Foreign Portfolio Investors (FPIs).

Key proposals include:

• Allowing retail mutual fund schemes based in IFSCs with resident Indian non-individuals as sponsors or managers to register as FPIs. This move enables Indian investors to participate more directly in foreign investments through regulated channels within IFSCs.
• Aligning contribution limits and investment norms for resident Indian participation in FPIs with the International Financial Services Centres Authority (IFSCA) Fund Management Regulations of 2025. This aims to facilitate greater Indian involvement in foreign portfolio investments by reducing regulatory mismatches.
• The introduction of the SWAGAT-FI framework (Single Window Automatic & Generalised Access for Trusted Foreign Investors). This simplifies the registration and compliance process for low-risk foreign investors such as sovereign wealth funds, government-owned funds, and highly regulated public retail funds. The framework streamlines onboarding, reduces redundant documentation, and provides extended compliance timelines, indirectly benefiting Indian investors by enhancing foreign fund inflows and investment opportunities.

SEBI is actively seeking public feedback on these proposals by August 29, 2025, signaling a move towards regulatory reform that encourages diversification of investment options for Indian investors in foreign markets.

Currently, only certain institutional investors meeting SEBI's criteria can register as FPIs to invest in foreign securities. However, under the proposed changes, retail investors in India would have a broader range of options to channel domestic capital into foreign assets through a regulated framework.

The proposed changes also focus on retail-oriented investment schemes set up in IFSCs, which would allow a wider range of India-based entities to invest in foreign assets. The investment limit for these schemes is capped at 10 per cent of the targeted corpus, in accordance with IFSC rules.

Under the current system, Non-resident Indians (NRI), Overseas Citizens of India (OCI), and resident Indians are not eligible to register as FPIs. However, the proposed reforms could potentially expand the range of India-based entities eligible to channel domestic capital into foreign assets through a regulated framework.

Moreover, SEBI proposes enabling Indian mutual funds to invest in overseas funds with India exposure. This could potentially bridge the gap between India’s domestic savings pool and international opportunities.

The Reserve Bank of India's liberalised remittance scheme allows individuals to remit up to Rs 2.5 lakh annually for overseas investments. However, the current system restricts certain institutional investors from registering as FPIs to invest in foreign securities.

In summary, SEBI’s recent proposals aim to expand Indian investors’ access to foreign funds through IFSC-based mutual funds registering as FPIs, simplify foreign investor onboarding via the SWAGAT-FI framework, and harmonize regulations to foster greater cross-border investment participation. These reforms could significantly enhance investment opportunities for Indian investors in the global market.

Finance-related entities, such as retail mutual fund schemes based in International Financial Services Centres (IFSCs), may soon become eligible to register as Foreign Portfolio Investors (FPIs) due to SEBI's proposals, thereby expanding financing options for Indian investors in foreign assets.

The simplified registration and compliance process for foreign investors through the SWAGAT-FI framework could potentially lead to increased foreign fund inflows in India, benefiting domestic investors by broadening their investment opportunities.

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