The Securities and Exchange Board of India (SEBI) has introduced major changes to encourage more investments in India by Foreign Portfolio Investors (FPIs) based in International Financial Services Centres (IFSCs). Under the new rules, FPIs operating from IFSCs can now have up to 100% of their funds come from non-resident Indians (NRIs), Overseas Citizens of India (OCIs), and Resident Indians (RIs).

This change aims to attract more investments from NRIs and OCIs, addressing their long-standing demands to participate more in Indian securities markets. Finance Minister Nirmala Sitharaman had emphasized the need to increase NRI investments in her July 2019 budget speech, even though India is already a top recipient of remittances globally.

According to the updated regulations, new FPI applicants must declare that at least 50% of their funds will be contributed by NRIs, OCIs, and RIs at the time of registration. Existing FPIs have six months to meet this requirement from the date of the circular. This declaration will be reviewed during the registration renewal process.

The regulatory framework also requires the submission of PAN cards and economic interest details of all NRI, OCI, and RI contributors at the time of registration. If a contributor does not have a PAN, the applicant must provide a declaration confirming the contributor's non-eligibility for PAN or taxable income in India. Additionally, if NRIs, OCIs, or RIs control non-individual entities or hold majority ownership, they must provide suitable PAN or declarations and identity documents.

While NRIs, OCIs, and RIs can now fully constitute FPIs, individual contributions are capped at less than 25% of the total FPI funds, with their combined contributions limited to under 50%.

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