SEBI to Issue Consultation Paper Within Weeks to Ease FPI Compliance Burden — October 31, 2026
In a bid to enhance international capital flows and improve ease of doing business, the Securities and Exchange Board of India (SEBI) will release a consultation paper within weeks reviewing compliance requirements for foreign portfolio investors (FPIs).
Addressing the Business Standard BFSI Insight Summit in Mumbai, SEBI Chairman Tuhin Kanta Pandey acknowledged that certain domestic regulatory obligations impose a heavier burden on overseas investors compared to global peers.
"We recognise that some compliance requirements in India remain more onerous than those in other major jurisdictions," Pandey stated. "We are reviewing these requirements and will issue a consultation paper to seek views on aligning them with global standards, while preserving the safeguards needed for investor protection and market integrity."
Streamlining Foreign Capital Access
The market regulator has been actively engaging with global funds to identify administrative bottlenecks, particularly in onboarding, market access, and trade settlement. SEBI is working alongside the Reserve Bank of India (RBI) to transition overseas investor onboarding from cumbersome manual compliance to end-to-end digital workflows.
Under trusted-investor access initiatives such as the SWAGAT-FI (Single Window Automatic and Generalised Access for Trusted Foreign Investors) framework, registration timelines have already been brought down to as little as five business days in certain cases, compared with turnaround times that previously stretched over a month.
Operational reforms highlighted by the regulator include:
- Operationalisation of cash market trade netting for FPIs to lower funding costs and increase trading efficiency during index rebalancing cycles.
- Adjustments to closing auction protocols and block-deal window restrictions to better align with international trading practices.
- Digital portal-based registration to reduce paperwork and facilitate quicker market entry.
Deepening Domestic Markets Amid Outflows
The forthcoming regulatory review arrives against the backdrop of elevated global macro volatility and periodic foreign institutional investor outflows. Pandey pointed out that while foreign portfolio flows depend on several fundamental factors—including corporate earnings growth, post-tax dollar yields, currency movements, and oil prices—regulatory architecture should not serve as an unforced barrier to capital entry.
Highlighting the structural growth of Indian finance, Pandey noted that India’s market capitalisation-to-GDP ratio has expanded from 69% in FY16 to approximately 130%. Over the same period, outstanding corporate bonds have reached nearly ₹61 lakh crore, representing about 55% of total bank credit extended to industry and services.
While domestic institutional investors and retail systematic investment plans (SIPs) provide a resilient foundation for domestic liquidity, the regulator stressed that international capital remains critical for widening funding availability and introducing institutional expertise.
Exchange Self-Listing and SME Framework
Beyond foreign investment norms, the SEBI chief addressed key structural issues facing domestic market infrastructure:
- Stock Exchange Self-Listing: Pandey clarified that permitting exchanges to list their own shares on their own trading platforms is neither permanently ruled out nor under active consideration, citing inherent conflict-of-interest risks given that exchanges also function as frontline market regulators.
- SME Governance: SEBI is assessing the listing framework for small and medium enterprises (SMEs), weighing post-issue market capitalisation thresholds, market-making models, and the phased implementation of Indian Accounting Standards (Ind AS) for larger SME issuers seeking transition to the main board.
The upcoming consultation paper will be put up for public comments to help SEBI finalise amendments that reduce compliance overheads without compromising systemic safeguards.
