Overview: The Securities and Exchange Board of India (SEBI) is reviewing disclosure requirements for Foreign Portfolio Investors (FPIs) to reduce compliance burdens while protecting market transparency. Reported options include a lower shareholding threshold for relief from detailed investor disclosures and possible exemptions for investments in professionally managed companies and public sector undertakings. SEBI has not confirmed these specific changes. Existing disclosure requirements remain in force.
The Securities and Exchange Board of India (SEBI) is reviewing disclosure requirements for Foreign Portfolio Investors (FPIs), with a consultation paper expected to set out the proposed changes. The review could ease compliance for some foreign investors holding concentrated positions in Indian listed companies.
The outcome matters to overseas funds and Indian businesses that rely on foreign investment. However, the reported relaxations are not yet confirmed, and the existing disclosure rules remain in force. Investors should wait for SEBI’s formal proposals before changing their compliance approach.
SEBI Chairman Tuhin Kanta Pandey has announced that the regulator would issue a consultation paper on FPI compliance requirements. The review aims to bring Indian rules closer to global standards while retaining safeguards for investors and market integrity. The announcement follows concerns that some Indian compliance requirements remain more onerous than those in other major markets.
What Relaxations Have Been Reported?
SEBI, according to an Economic Times report, was considering ways to ease additional disclosure requirements for FPIs with large or concentrated investments. The options discussed in the report include:
- A lower shareholding threshold: An FPI with a relatively small holding in a company could receive relief from detailed investor disclosures even if its portfolio is concentrated, though no specific threshold has been announced yet.
- Possible exemptions: Relief could cover concentrated investments in professionally managed companies without identifiable promoters and in public sector undertakings (PSUs).
- Fewer forced share sales: The reported aim is to simplify compliance without weakening transparency or forcing funds to sell shares merely to meet disclosure requirements.
These options have been reported in the media but have not been confirmed by SEBI as formal proposals. FPIs should continue to follow the existing framework.
What Are the Existing FPI Disclosure Requirements?
SEBI’s additional disclosure framework requires detailed information about ownership, economic interests and control where an FPI crosses either of two criteria:
- Concentration criterion: More than 50% of the FPI’s Indian equity assets under management (AUM) is invested in a single Indian corporate group. A lower threshold of 33% applies to certain FPIs availing a specified existing relaxation under SEBI’s framework.
- Size criterion: The FPI, individually or together with its relevant investor group and qualifying offshore derivative instrument positions, holds more than ₹50,000 crore in Indian equity AUM.
The investor-group rules account for relevant FPIs linked through common ownership or control. The applicable criteria also contain specific provisions for segregated portfolios. Crossing a threshold can trigger additional disclosures, subject to the relevant exemptions and realignment provisions.
Covered FPIs must provide granular details of entities holding ownership or economic interests in, or exercising control over, the fund. Disclosure extends on a full look-through basis to natural persons, without an ownership threshold. The information is submitted to the relevant Designated Depository Participant (DDP) under SEBI’s prescribed framework.
Certain investors qualify for exemptions subject to the applicable conditions. These include eligible government and government-related investors, sovereign wealth funds, public retail funds, and qualifying university funds and university-related endowments.
Conditional relief also exists for certain investments in corporate groups where the apex company has no identified promoter. This relief is subject to conditions, including limits on the FPI’s remaining group exposure after excluding its holding in the apex company. The combined holdings of relevant FPIs in that apex company must also remain below 3% of its total equity share capital.
SEBI introduced the additional disclosure framework in 2023 following concerns about the possible use of FPIs to conceal concentrated ownership. The rules seek to prevent promoters or connected entities from circumventing minimum public shareholding requirements, takeover regulations and restrictions under Press Note 3 of 2020 on certain investments from countries sharing a land border with India.
In April 2025, SEBI raised the size threshold from ₹25,000 crore to ₹50,000 crore. The current review could lead to further changes, but the existing requirements remain applicable until SEBI formally changes them.
Possible Impact on Indian Businesses
A relaxation could make it easier for eligible funds to maintain concentrated investments in Indian listed companies without facing additional disclosure burdens. Listed companies and promoter groups should watch for changes that could affect foreign shareholding patterns or investor decisions.
The effect on startups and unlisted businesses would generally be indirect, through wider investment conditions and capital-market activity. The review does not automatically change foreign direct investment (FDI) rules, Foreign Exchange Management Act (FEMA) requirements or sector-specific investment restrictions.
The distinction matters for businesses seeking foreign capital. An FPI investing in listed securities follows a different regulatory framework from a foreign investor making a direct investment in an Indian company. The appropriate route depends on the investment objective, ownership structure and applicable rules.
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FAQs
No. SEBI has announced a review and plans to issue a consultation paper. The specific relaxations reported in the media have not been confirmed as changes to the existing framework.
FPIs crossing the applicable concentration threshold or the size threshold of more than ₹50,000 crore in Indian equity AUM may be covered. The general concentration threshold is more than 50%, with a 33% threshold applying to certain FPIs availing a specified existing relaxation. Investor-group rules and applicable exemptions must also be considered.
Not automatically. FPI disclosure rules concern portfolio investments in securities, while FDI compliance covers direct investment in Indian businesses. The applicable reporting and approval requirements depend on the investment route and structure.
SEBI’s review could reduce disclosure burdens for some foreign portfolio investors while retaining safeguards against concealed ownership and regulatory circumvention. Investors should watch for the consultation paper and any subsequent circular. Until SEBI announces changes, the existing framework continues to apply.
