Sebi to simplify registration for FPIs looking to invest in govt securities | Stock Market News

Mumbai: India’s capital markets regulator is set to ease the registration of foreign portfolio investors (FPIs) if they want to invest in government-backed securities, even as it proposed doubling the equity investment threshold set for granular disclosures by FPIs to ₹50,000 crore. 

The Securities and Exchange Board of India’s (Sebi) whole time member Ananth Narayan G. said on Friday that for FPIs seeking to invest in government-oriented funds, the regulator will be introducing a provision, where FPIs will not have to provide Sebi-oriented data.

Speaking at an event, he elaborated that for FPIs investing only in government funds, Sebi would only ask for data which other authorities like the Reserve Bank of India and Central Board of Direct Taxes require for registration. “There will be zero requirements for a lot of things including investor group (are you holding too much of one particular security) all that data will not be sought if (it’s) the government of India only bond.”

Investment threshold

Meanwhile, in a consultation paper released on Friday, Sebi said the proposal to enhance the investment threshold for granular details is on account of the rise in daily market volumes.

The proposal, part of an update to Sebi’s August 2023 circular, suggests raising the threshold for FPIs to disclose detailed information about their investors and stakeholders on a “look-through” basis, from ₹25,000 crore to ₹50,000 crore in equity assets under management (AUM).

This change aims to enhance market transparency and prevent potential circumvention of regulations such as Press Note 3 (PN3) and minimum public shareholding (MPS) norms, especially as market volumes have surged. PN3 requires prior government approval for investments from countries sharing a land border with India and government approval for any change in ownership of an investment from a country sharing a land border with India.

The proposal is a response to the substantial rise in market turnover, which has seen a 122% increase in the average daily turnover on the National Stock Exchange (NSE) from FY2022-23 to FY2024-25, as per Sebi’s consultation paper.

The additional disclosure framework will also affect offshore derivative instruments (ODIs) and segregated portfolios, ensuring that equity holdings across both FPIs and ODIs are accounted for in assessing whether the size criteria are met. Sebi has invited public comments on the proposed changes until 31 January.

Under Sebi’s August circular, certain FPIs with large Indian equity AUM were already mandated to disclose granular details of all entities holding ownership, economic interest, or control in an FPI. Specifically, FPIs were required to disclose this information if they met one of two criteria:

Holding more than 50% of their Indian equity AUM in a single Indian corporate group, a provision designed to prevent the circumvention of MPS and Sebi’s Substantial Acquisition of Shares and Takeover (SAST) Regulations.

Secondly, having individual or group equity AUM exceeding ₹25,000 crore, aimed at preventing potential violations of PN3.

Given the significant rise in market turnover since the initial limit was set, Sebi has now proposed increasing this threshold to ₹50,000 crore.