NEW DELHI: SEBI has put forward a fresh set of proposals aiming to make it simpler for resident Indians and mutual funds to invest in global funds, opening doors for broader participation in global markets.
The regulator has suggested that retail investment schemes established in India’s International Financial Services Centres (IFSCs)—with non-individual resident Indians as sponsors or managers—be permitted to register as Foreign Portfolio Investors (FPIs).
Currently, such avenues are restricted to a narrow set of qualified institutions. The proposed shift would allow schemes managed by entities based in IFSCs, with Indian sponsors, to become FPIs under a more inclusive framework.
Notably, SEBI’s draft norms cap the investment limit for these IFSC-based FPIs at 10 per cent of their overall targeted corpus, aligning with existing IFSC rules. Alongside this, the regulator has recommended replacing the requirements for sponsors and managers with a broader classification, allowing either the fund management entity or any associate to take up these roles for IFSC FPIs.
Diversification opportunities
SEBI is also looking to permit Indian mutual funds to allocate capital to overseas funds that have some India exposure, potentially offering more global diversification opportunities for investors. This could help bridge the gap between India’s domestic savings pool and the world’s investment opportunities.
At present, only certain institutional investors that meet SEBI’s stringent conditions can participate as FPIs and invest in international securities. Resident Indians, NRIs, and OCIs are not currently eligible to directly register as FPIs, though they can contribute to or be part of an FPI structure under tightly defined limits.
The Reserve Bank of India allows individuals to remit up to Rs2.5 lakh abroad each year for investments under the Liberalised Remittance Scheme, but retail investors often rely on indirect vehicles, like domestic mutual fund FoFs, to access international markets.
The IFSC, as a designated special economic zone and financial center within India’s borders, makes it easier for entities to pursue international financial activities. SEBI’s new recommendations seek to extend these benefits to a wider array of investors and structures, inviting public feedback through August 29.
If enacted, these changes may help Indian investors diversify with global exposure and bolster the role of Indian capital in international finance.
