Sebi Weighs Easing Granular Disclosure Rules for Concentrated Foreign Portfolio Investors — October 28, 2026

The Securities and Exchange Board of India (Sebi) is re-evaluating its stringent disclosure framework governing foreign portfolio investors (FPIs) and is preparing to release a consultation paper to solicit public and industry feedback on potential relaxations.

The regulator has held preliminary discussions with market intermediaries and global custodians to explore ways to streamline the norms. The primary objective is to balance rigorous regulatory oversight with ease of doing business, ensuring that anti-avoidance measures do not inadvertently trigger destabilising sell-offs in domestic equities.

Key Proposals Under Consideration

The existing framework mandates FPIs that exceed specific asset thresholds or hold concentrated equity portfolios in a single company or corporate group to disclose granular details regarding all entities holding economic interest, ownership, or control.

To mitigate procedural hurdles for genuine foreign funds, Sebi is reviewing several relaxations:

• De Minimis Holding Threshold: Establishing a specific low-threshold equity cap in an investee company below which an FPI would be exempt from submitting granular investor details, even if the scheme runs a concentrated strategy focused on very few stocks.
• Exemptions for Promoterless and PSU Entities: Excluding FPIs from additional reporting burdens when their concentrated exposures are in professionally run companies with no identifiable promoters, as well as public sector undertakings (PSUs). Because these companies lack promoter-driven manipulation risks, the risk of circumventing minimum public shareholding (MPS) rules is negligible.
• Relief for Focused Investment Mandates: Rationalising compliance for non-broad-based funds whose stated investment charters inherently target high-conviction positions, ensuring they are not penalised under norms designed to deter illicit round-tripping.

Addressing Unintended Market Distortions

The enhanced disclosure regime was initially instituted to prevent the circumvention of Press Note 3 requirements—which mandate government approval for foreign direct investment from nations sharing land borders with India—and to ensure compliance with the 25% minimum public shareholding norm. While sovereign wealth funds, government entities, and large public retail funds already enjoy exemptions, private funds and specialised asset managers have faced significant compliance friction.

Regulatory officials have noted that without calibrated relaxations, rigid enforcement could drive overseas funds to offload equity stakes prematurely simply to fall below regulatory trigger points, putting unnecessary downward pressure on Indian equities.

Significance for Indian Markets

For Indian retail and institutional investors, regulatory rationalisation represents a vital step toward safeguarding institutional liquidity. Relieving genuine overseas funds from excessive disclosure requirements reduces structural compliance costs, reduces redemption pressures, and supports foreign institutional inflows across mid-cap and large-cap counters on the BSE and NSE.