Overview: The Securities and Exchange Board of India (SEBI) has approved a broad set of regulatory reforms covering foreign portfolio investors (FPIs), Portfolio Management Services (PMS), settlement proceedings, accredited investors and other market intermediaries. The changes widen FPI access to non-agricultural commodity derivatives and overhaul the PMS framework, including a new ₹25 lakh mutual-fund investment route called PRIM.
Introduction
India’s capital markets are set for changes across foreign portfolio investment and portfolio management following decisions taken by the Securities and Exchange Board of India (SEBI) on 24 September 2026. The measures widen investment avenues for foreign portfolio investors (FPIs) and portfolio managers, while also changing the framework for settlement proceedings and investor accreditation.
For businesses and financial intermediaries operating around these regulated investment structures, the changes are relevant not only from an investment perspective but also for compliance, documentation, reporting and internal processes. Understanding the revised requirements is therefore important before implementing transactions under these frameworks.
FPIs Get Wider Access to Commodity Derivatives
SEBI has approved wider participation by FPIs in non-agricultural index derivatives, whether or not the contracts are settled in cash.
FPIs will also be permitted to participate in non-cash-settled non-agricultural commodity derivatives, subject to prescribed safeguards.
For contracts involving physical delivery, FPIs must close their outstanding contracts before the delivery obligation arises. The applicable requirements also provide for arrangements with trading or trading-cum-clearing members to handle any positions that remain open.
The changes are intended to broaden foreign participation in India’s commodity derivatives market while addressing the operational issues associated with physical delivery.
PMS Framework Gets a Wider Investment Universe
SEBI has approved the SEBI (Portfolio Managers) Regulations, 2026, replacing the existing 2020 framework. The new regulations expand the investment universe for PMS while simplifying and consolidating regulatory requirements.
Under the new framework, portfolio managers will be permitted to invest in:
- Initial Public Offerings (IPOs) and primary-market debt issuances;
- Up to 10% of client AUM in investment-grade, non-convertible, unlisted debt securities under discretionary PMS, subject to client consent;
- Exchange-traded derivatives up to 1.25 times the client’s AUM, subject to prescribed conditions; and
- Specified foreign securities, subject to applicable conditions and foreign-exchange requirements.
PRIM Introduces a ₹25 Lakh Route for Mutual Fund Investments
SEBI has also approved the Portfolio Managers Route for Investing in Mutual Fund Units (PRIM). Under this route, portfolio managers can invest client funds in direct plans of mutual funds, including ETFs, index funds and Specialised Investment Funds (SIFs).
The minimum investment under PRIM will be ₹25 lakh. This is separate from the ₹50 lakh minimum applicable to conventional PMS. Therefore, the new ₹25 lakh threshold does not reduce the minimum investment requirement for conventional PMS.
The framework also introduces Independent Fund Managers (IFMs) and prescribes a ₹2 crore net-worth requirement for a portfolio manager operating exclusively under the PRIM framework.
Settlement Framework Gets a New Structure
SEBI has approved the SEBI (Settlement of Administrative and Civil Proceedings) Regulations, 2026, replacing the earlier settlement framework.
Under the revised process:
- SEBI may issue a settlement notice before a show-cause notice, giving the entity 60 days to apply for settlement, subject to the prescribed exceptions;
- The period for applying for settlement after service of a show-cause notice will increase from 60 days to 90 days;
- A fast-track settlement mechanism will apply to specified cases involving settlement amounts of up to ₹10 lakh;
- Settlement proceedings will also cover specified cases involving misrepresentation of financial statements or diversion of funds; and
- Wrongful gains will be treated separately and disgorged rather than being included in the base settlement amount.
These changes provide a more structured settlement process while separately addressing wrongful gains and investor-related amounts.
Accredited Investor Framework Expanded
SEBI has also expanded the Accredited Investor framework.
Managers of AIFs, AMCs offering SIFs and SEBI-registered portfolio managers will be permitted to undertake investor accreditation through an additional, optional route alongside existing accreditation agencies.
The revised framework also introduces securities-market exposure as an additional eligibility criterion, including a ₹5 crore securities-market exposure threshold for specified categories of investors.
Persons resident outside India, including FPIs, will also be treated as deemed accredited investors under the revised framework, subject to the applicable provisions. LLPs have additionally been brought within the accreditation framework where each partner qualifies as an accredited investor.
Other SEBI Reforms
The Board has also approved several other measures, including:
- Enabling depository receipts on Real Estate Investment Trust (REIT) and Infrastructure Investment Trust (InvIT) units, facilitating access to foreign investors;
- Easing certain REIT and InvIT approval requirements;
- Relaxing requirements relating to the listing of outstanding unlisted non-convertible debt securities for issuers entering the listed market for the first time;
- Relaxing certain requirements for research analysts and research entities relating to call recordings with institutional clients; and
- Introducing a common advertisement code for specified regulated entities.
What Do the Reforms Mean for Businesses?
The changes expand investment options, but regulated entities will need to align their processes with the revised framework.
FPIs: Wider access to commodity derivatives will require appropriate arrangements for managing positions, particularly where contracts involve physical delivery.
PMS managers: The new investment avenues, PRIM route, derivative exposure limits and foreign-security investments may require corresponding updates to investment policies, client agreements, disclosures, internal controls and portfolio monitoring.
AIFs, SIFs and other intermediaries: The revised accredited-investor framework creates an additional accreditation route and changes how eligible investors may be onboarded.
Indian businesses: Transactions involving FPIs, PMS, AIFs or other regulated investors should continue to be assessed for applicable SEBI, FEMA, ownership, reporting and disclosure requirements.
Greater investment flexibility therefore does not remove the need for regulatory compliance.
Setindiabiz Support
SEBI’s latest reforms expand investment avenues across PMS, FPI and other regulated market structures while introducing new compliance considerations.
Setindiabiz supports businesses with company incorporation, foreign investment documentation, business structuring and ongoing regulatory compliance. Businesses entering into transactions involving foreign investors or regulated investment structures should assess the applicable FEMA, SEBI, reporting and documentation requirements before implementing the transaction.
FAQs
1. What has SEBI changed for FPIs?
2. What new investments can PMS managers make under the 2026 framework?
3. What is the ₹25 lakh PRIM minimum investment?
4. Has the PMS minimum investment been reduced from ₹50 lakh to ₹25 lakh?
5. Do these reforms remove SEBI or FEMA compliance?
In This Article
Author Bio
Shivani Tyagi
Shivani Tyagi is a legal professional with background in legal research, drafting, and compliance analysis. Skilled in reviewing legal documents, statutory and case law research, she focuses on simplifying corporate legal topics and brings research-driven clarity to Setindiabiz's compliance-focused blogs.
