Sebi Simplifies Rules for FPI Govt Bond Investments

New Delhi, Jun 18 (PTI) Markets regulator Sebi on Wednesday decided to simplify rules and ease regulatory compliance for Foreign Portfolio Investors (FPIs) that invest exclusively in Indian government securities (G-Secs).

The move is aimed at attracting more long-term bond investors to India.

Currently, foreign investors invest in Indian debt through three routes -- General, Voluntary Retention Route (VRR) and the Fully Accessible Route (FAR).VRR and FAR allow investments without many restrictions, such as security-wise or concentration limits.

"With an objective to enhance ease of doing business through a risk-based approach and optimum regulation, the board approved the proposal to relax certain regulatory requirements for all existing and prospective FPIs that exclusively invest in G-Secs. These measures are expected to further help in facilitating investments by FPIs in G-Secs, " Sebi said in a statement after the conclusion of the board meeting.

This comes in the wake of increasing interest in the country's debt market through routes such as VRR and the FAR.

Under the approved relaxations for FPIs investing in G-Secs, the periodicity of mandatory KYC review for such FPIs will be harmonised with RBI's requirements. Accordingly, such foreign investors will have less frequent mandatory KYC reviews.

Further, existing and prospective FPIs that invest in G-Secs under the FAR would not be required to furnish investor group details.

"Non-resident Indians, Overseas Citizens of India and Resident Indians Individuals shall be permitted to be constituents of GS-FPI without any restrictions applicable to other FPIs, including being in control of GS-FPIs. The conditions regarding the Liberalised Remittance Scheme and in global funds whose Indian exposure is less than 50 per cent shall continue to apply," Sebi said..

With regard to the timeline for disclosing material changes, the regulator has decided a uniform 30-day window for all material change disclosures for IGB-FPIs. At present, FPIs are required to report key changes within 7 or 30 days based on the type of change.

Sebi said that identification as GS-FPI at the time of on-boarding and transition of existing as well as prospective FPIs to GS-FPIs and vice-versa, shall be subject to conditions as may be specified by the board of Sebi.

India's inclusion in major global bond indices-- JP Morgan, Bloomberg, and FTSE--is expected to bring more foreign investments..

According to Sebi data, FPI investment in FAR-eligible bonds has already risen significantly, reaching over Rs 3 lakh crore (USD 35.7 billion) by March 2025.