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  • Writer's pictureShafaq Uraizee Sapre

C&M E-ALERT: SEBI makes way for enhanced participation by NRI, OCI, and Resident Indian Investments in FPIs based out of IFSC

The Securities and Exchange Board of India (“SEBI”) has amended the Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2019 (“FPI Regulations”) vide the Securities and Exchange Board of India (Foreign Portfolio Investors) (Second Amendment) Regulations, 2024 dated June 26, 2024 (the “Amendment”). Pursuant to the Amendment, SEBI has removed the restrictions on the aggregate contribution from non-resident Indians (“NRIs”), overseas citizens of India (“OCIs”) and resident Indian individuals (“RIs”) in the corpus of a Foreign Portfolio Investor (“FPI”) set up in any International Financial Services Centre (“IFSC”) in India regulated by the the International Financial Services Centres Authority (“IFSCA”).


NRIs and OCIs are permitted to make investments in listed securities in India under the Foreign Portfolio Investors (“FPI”) route, subject to compliance with inter alia the Indian foreign exchange laws, including the FPI Regulations and the conditions set out in the existing Master Circular (the “Master Circular”) for Foreign Portfolio Investors, Designated Depository Participants (“DDPs”) and Eligible Foreign Investors and any other conditions specified by SEBI from time to time. NRIs, OCIs and RIs are permitted to become the constituents of an FPI and contribute to its corpus as per the conditions mentioned in the FPI Regulations and the Master Circular, which includes inter alia, (i) an individual cap of 25% of the total contribution in the corpus of the FPI by each of the NRI, OCI and RI and (ii) a cap of 50% of the total contribution in the corpus of FPI made by the NRIs, OCIs and RIs in aggregate. In simple terms, this meant that for any entity to become eligible for registration as an FPI and make investments in India under the FPI route, constituents other than NRIs, OCIs and RIs must form part of the applicant-FPI and hold atleast 50% of the total contribution in the corpus of such an applicant-FPI.


In order to ease and promote investments into the IFSC, SEBI has, under the Amendment, increased the aggregate contribution limit for NRIs, OCIs, and RIs from 50% to 100% of the total contribution in the corpus of an FPI set up in a IFSC in India, subject to compliance with certain terms and conditions. These terms and conditions include submission of Permanent Account Number (PAN) (i.e. the Indian tax identification number) of all constituents, disclosure of any indirect holding in the FPI through non-individual constituents that are majority contributed to/owned/controlled by NRI/OCI/RI individuals on a look through basis. In the absence of PAN, the applicant-FPI is required to submit relevant declarations regarding exemptions to from obtaining PAN from the Indian Income tax authorities and other identification documents such as passport, OCI card, Aadhar Card details.


Exemption from submission of above stated documents was approved subject to the FPI satisfying certain conditions laid out in IFSCA regulations including but not limited to:

  1. Contribution of all investors of the fund are pooled into one investment vehicle that is registered as an FPI, with no side vehicles;

  2. The fund has a minimum of 20 investors with each investor contributing not more than 25% to the corpus of the fund;

  3. A maximum of 20% of the corpus of the fund may be invested in the equity shares of an Indian listed entity;

  4. The investors in the fund do not have a say in the investment decisions of the fund. The Investment Manager (IM) is completely independent with respect to taking investment decisions for the fund etc.

Following the SEBI Board Meeting of April 30, 2024, the IFSCA vide its circular dated May 02, 2024 (“IFSCA Circular”), adopted the regulatory framework approved by SEBI in its Board Meeting and SEBI was yet to notify necessary amendments to the FPI Regulations.


The Amendment to the FPI Regulations have become effective and hence, the FPIs based in the IFSC can take the benefit of the relaxations going forward.


In terms of the Amendment, SEBI has included the following conditions for FPIs which need to be satisfied for NRIs/OCIs/RIs to be constituents of an FPI in terms of Regulation 4(c) of the FPI Regulations:

  1. the contribution of a single NRI or OCI or RI shall be below twenty-five percent of the total contribution in the corpus of the FPI;

  2. the aggregate contribution of NRIs, OCIs and RIs in the corpus of the FPI shall be below fifty percent of the total contribution in the corpus of the FPI;

  3. the contribution of RIs shall be made through the Liberalised Remittance Scheme notified by the Reserve Bank of India and shall be in global funds whose Indian exposure is less than fifty percent;

  4. the NRIs, OCIs and RIs shall not be in control of the FPI;

  5. any other conditions as may be specified by the Board from time to time. 

It should be noted that the above conditions already form part of the existing Master Circular issued by SEBI. Also, in relation to the condition mentioned in (d) above that the NRIs, OCIs and RIs shall not be in control of the FPI, the Master Circular further states that the same is not applicable if the FPI is an ‘offshore fund’ for which ‘No Objection Certificate’ has been issued by the Board in terms of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, or is controlled by an Investment Manager which is controlled and/or owned by NRI or OCI or RI if the following conditions are satisfied:

  1. such Investment Manager is appropriately regulated in its home jurisdiction and registered with SEBI as a non-investing FPI, or

  2. such Investment Manager is incorporated or setup under the Indian laws and appropriately registered with SEBI.

As mentioned, the Amendment states that the provision of aggregate contribution mentioned in (b) above shall not be applicable to an FPI set out in an IFSC in India and regulated by the IFSCA Authority subject to conditions as may be specified by SEBI.


SEBI has thereafter issued a circular dated June 27, 2024 to all FPIs, DDPs and the Custodians, the Depositories and the Stock Exchanges and Clearing Corporations setting out the documentation requirements from the applicant-FPI in light of the above Amendment. This includes guidelines on submission of a declaration stating its intent to have aggregate contribution, of NRIs, OCIs and RI individuals of 50% or more in its corpus, to its DDP. Existing FPIs may submit this declaration within 6 months from the date of this circular (i.e. December 27, 2024). The said declaration can be reviewed only at the time of renewal of registration by providing a suitable declaration to that effect. Any changes to the above status / statements in the application / declarations filed are considered as a ‘Type II” material change in terms of the FPI Regulation.  


The Amendment from SEBI is a welcoming move in providing more clarity and avoiding any ambiguities in relation to investments to be made by NRIs/OCIs/RIs in FPIs set out in IFSC. The move will not only promote more business opportunities in the newly set up IFSC in Ahmedabad, India but also promote increased inbound investments into India considering the various legal, compliance and tax relaxations being offered to entities set out in the IFSC. It will also give the FPIs an ease in receiving contributions considering that, if they are set out of the IFSC, an aggregate contribution limit of 100% of the corpus of the FPI is allowed to be received from NRIs, OCIs and RIs as against the aggregate contribution limit of 50% from such constituents of FPIs established in non-IFSC jurisdictions.



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We would also like to extend out special thanks to Abizer Merchant, interning with us, for providing his assistance with the research work.

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