The Securities and Exchange Board of India (SEBI) has introduced significant regulatory changes to facilitate easier compliance for Foreign Portfolio Investors (FPIs) who primarily invest in government securities. The amendments are intended to increase foreign capital in India's sovereign debt market, effective February 8, 2026.
Exemption from Investor Group Information: FPIs investing solely in government securities through the Fully Accessible Route (FAR) will no longer be required to provide their investor group information at the time of registration. This exemption simplifies the onboarding process and decreases administrative costs for investors.
Streamlined Renewal of Registration: GS-FPIs will be required to pay fees to their Designated Depository Participants (DDPs) only if they wish to renew their registration for the next three-year term. They are not expected to file periodic statements regarding changes in information unless there are material changes.
Simplified Know Your Customer (KYC) Norms: The KYC review cycle for GS-FPIs has been harmonized with the review norms for their bank accounts, as mandated by the Reserve Bank of India. This harmonization makes it easier to comply and increases efficiency.
Investment by Resident Indian Individuals: Investment by resident Indian individuals in GS-FPIs will be allowed only under the Liberalised Remittance Scheme (LRS) of the Reserve Bank of India. Such investment will be made possible only in international funds with an Indian exposure of less than 50%.
These regulatory amendments are part of SEBI's larger initiatives to simplify regulations and attract more international capital to government securities, thereby increasing market depth and facilitating fiscal financing requirements. The action will spur more foreign investment in India's sovereign debt market by removing procedural barriers.
The new structure will take effect on February 8, 2026. SEBI has requested custodians and designated depository participants, along with their respective standards-setting bodies, to incorporate appropriate changes into their systems so that the new structure can be implemented successfully.
SEBI's move to relax compliance rules for FPIs investing in government securities represents a significant step towards making India's sovereign debt market more attractive to foreign investors. By easing registration procedures and reducing compliance burdens, SEBI aims to foster a more diversified and robust investment climate.