Sebi launches FPI cells to boost foreign investment, strengthen transparency

Recognizing the pivotal role of foreign portfolio investors (FPIs) in driving economic growth, the Securities and Exchange Board of India (Sebi) is overhauling its regulatory framework. These reforms aim to position India as a premier destination for foreign capital by streamlining registration processes, enhancing transparency, and reducing regulatory burdens.

Ananth Narayan G, a whole-time member of Sebi, emphasized the regulator’s efforts to ensure a steady flow of sustainable capital from both domestic and foreign sources.

Streamlining FPI operations

Speaking at the Financial 3.0 Summit hosted by the Confederation of Indian Industry (CII), Narayan detailed Sebi’s initiatives to ease the regulatory landscape for FPIs. A key component of this effort is the establishment of FPI cells—a dedicated team of officers tasked with direct outreach to FPIs. These cells are designed to serve as a single point of contact, addressing registration issues and providing a clear understanding of India’s regulatory environment.

Read this | FPIs' India frenzy is now at a nine-year peak

“These newly formed cells has officers who reach out to FPIs directly. We have reached out to more than 500 FPIs through this route, where we tell them about landscape in India and regulatory outlook towards FPIs. This serves as a one stop shop for any FPI having any issue in the registration or any other issue as well" the WTM said,” noted Narayan.

Domestic vs foreign capital

Despite the surge in domestic investments, with ₹12.5 trillion funnelled into risk-oriented mutual fund schemes over the last five years, Narayan emphasized the ongoing need for high-quality foreign savings, which have amounted to ₹3.5 trillion through FPIs. “Our requirement for foreign quality savings remains,” he added.

Narayan also highlighted Sebi’s recent circular requiring detailed risk-based disclosures from certain FPIs, noting its successful implementation. The regulator managed to "stop what they wanted to stop while ensuring no good people are hurt in the bargain." 

However, Sebi is now exploring the possibility of easing disclosure requirements for FPIs with transparent and regulated models, such as sovereign wealth funds, government-owned entities, and pension funds. 

“We trust them because they are regulated, and we know what they are doing. For these kinds of FPIs where we believe we don't require much information, we are looking at ways for how to make life a lot easier for them,” Narayan said.

Ensuring transparency and efficiency

While Sebi is considering these relaxations, Narayan clarified that strict disclosure requirements would remain in place for Overseas Direct Investments (ODIs) and FPIs with segregated portfolios. The regulator is reviewing 3,300 responses to its consultation paper on this matter.

To further streamline FPI registrations, Sebi is working on a standardized procedure across all custodians and creating a tracker to monitor registration applications, particularly for FPIs investing solely in government bonds.

Additionally, Narayan revealed that custodians or clearing banks, following a nudge from Sebi, will begin making funds available to FPIs on the day of settlement starting next week. 

He acknowledged concerns over increased custodian charges but defended the move, stating it would convert "an implicit opaque charge into a transparent fee." 

Also read | Sebi ramps up investigations amid market turmoil

“Transparent charges, efficiency, and making sure there is ease of doing business for FPI is important. The less we have of hidden charges, more transparent charges, it would be good for everybody," he emphasized.