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Informist, Wednesday, Aug. 13, 2025

--SEBI exempts FPIs investing only in g-sec from some FPI regulations 

--SEBI exempts FPIs investing only in g-sec from investor group limits 

--SEBI: Relaxed norms for FPIs investing only in g-sec effective in 180 days 

NEW DELHI – The Securities and Exchange Board of India has notified relaxing some of the regulatory compliances for foreign portfolio investors investing solely in Indian government securities, the regulator said in a gazette notification dated Monday. The relaxed norms come into force on the 180th day from the date of publication of these regulations, it said.

According to the notification, in another 178 days, SEBI will exempt FPIs investing in government securities from adhering to investor group limits. SEBI regulations currently dictate that multiple FPIs belonging to the same investor group be clubbed, with the applicable investment limit being that for a single FPI. This helps the regulator ensure the aggregate investment of the group does not exceed prescribed limits. When it comes to government securities, while limits on FPIs' investments are prescribed and monitored by the Reserve Bank of India, these foreign investors must disclose their investments to both the central bank and SEBI. While the RBI gets a daily transaction report, a monthly report is filed with the capital markets regulator, adding to FPIs' compliance burden.

The relaxation comes after the marget regulator, in its board meeting in June, decided to relax regulatory compliances for FPIs investing in g-secs. SEBI also notified removal of investment limits for non-residents, overseas citizens of India, and resident Indian individuals in an FPI. Currently, single non-residents, overseas citizens of India, and resident Indian individuals can hold less than 25% of the total contribution in the corpus of the FPI, and their aggregate contribution is capped at 50%. 

The notification also said that in another 178 days, FPIs investing in only government securities will not have to keep details regarding the investor group maintained with the designated depository participant at all times. The requirement is more relevant for monitoring FPI exposures to equities and corporate bonds, SEBI had earlier said. FPIs investing in g-secs are also exempted from disclosing to designated depository participants any direct or indirect change in structure or common ownership or control of the foreign portfolio investor or investor group, the notification added. 

These changes come against the backdrop of SEBI's intent to bring "light-touch" regulations for sovereign funds and FPIs interested in investing in government bonds, especially with the inclusion of gilts in global indices of J.P. Morgan and Bloomberg Emerging Market (EM) Local Currency Government Index and related indices.

In June, SEBI had also relaxed other regulations FPIs must comply with, which are seen as cumbersome and repetitive. It had relaxed the review of know-your-customer details for government bond investors by their custodians in line with RBI's timelines, along with a few other changes. These changes are yet to be notified.  End

Reported by Priyasmita Dutta

With inputs from Aaryan Khanna

Edited by Avishek Dutta

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