Research and Articles

• The December 2024 Circular became effective from November 17, 2025, aligning ODI reporting and disclosure obligations with the broader FPI framework and strengthening look-through and concentration requirements.

• Restrictions on ODIs referencing derivatives and on derivative-based hedging, along with certain other requirements under the December 2024 Circular, became effective from December 17, 2025.

• SEBI notified the SWAGAT-FI framework with a 6-month transition period, as originally proposed.

• SEBI issued a consultation paper proposing revisions to the Master Circular dated May 30, 2024, to streamline the regulatory framework and improve compliance efficiency.

INTRODUCTION

As the curtain falls on 2025, we look at the changes introduced in the regulatory landscape governing Foreign Portfolio Investors (“FPIs”). While the first half of 2025 saw a relatively measured pace of change, several consultation proposals issued during this period were implemented in the latter half of the year. Separately, the December 2024 Circular (as defined below) aligning ODI (“Offshore Derivative Instruments”) reporting obligations with the broader FPI disclosure regime, became effective during the second half of 2025. In this edition of our regulatory digest, we examine the key developments in the FPI space between July to December 2025.

updates till june 2025

Till the mid-year mark of June 30, 2025, a few key developments had taken place in the FPI space, including (i) the threshold for submission of additional disclosures by FPIs, based on Size Criteria, has been relaxed by increasing the limit to INR 50,000 crore (approx. USD 6 billon); (ii) Extension of the deadline for implementation of granular disclosure norms under the December 2024 Circular from May 17, 2025, to November 17, 2025 and (iii)  the issuance of consultation paper dated May 13, 2025 proposing relaxation in regulatory compliances for FPI applicants investing only in Indian Government Bonds¹, followed by approval of the proposals by the SEBI Board² and the subsequent issuance of a circular to operationalise the same³.

Please find an elaborate discussion of developments in the FPI space during January to June 2025 in our Mid-Year FPI Wrap 2025, available here.

updates Post june 2025

At its Board meeting held on September 12, 2025⁴, SEBI approved a set of measures in the FPI space aimed at encouraging participation by low-risk foreign investors and streamlining regulatory processes. Key approvals included - the introduction of the SWAGAT-FI framework for trusted investors; the launch of the India Market Access Portal as a centralised facilitation platform; and amendments to the FPI Regulations to align them with the fund management regime applicable in IFSCs (International Financial Services Centres).

Please find our analysis of the SEBI approvals along with the consultation here.

november 17, 2025 - EXTENSION OF granular disclosure to ODI subscribers 

Under SEBI circular SEBI/HO/AFD/AFD-PoD-2/CIR/P/2023/148 dated August 24, 2023 (“Additional Disclosure Circular”), granular disclosures initially applied only to FPIs breaching the 50% Concentration Criteria or Size Criteria, and not to ODI subscribers. This position changed pursuant to SEBI’s circular dated December 17, 2024 titled “Measures to address regulatory arbitrage with respect to Offshore Derivative Instruments (ODIs) and FPIs with segregated portfolios vis-à-vis FPIs” (“December 2024 Circular”), which extended the same disclosure framework to ODI subscribers. Accordingly, ODI subscribers breaching the 50% Concentration Criteria or Size Criteria are now required to provide full look-through granular disclosures of ownership, economic interest, and control, up to the level of all natural persons, without any threshold. While these requirements were initially scheduled to come into effect 5 months from the date of the December 2024 circular, i.e., May 17, 2025, SEBI subsequently extended the implementation timeline, and the framework ultimately became effective from November 17, 2025. The disclosure triggers, cure periods, mechanics, and exemptions applicable to ODI subscribers are aligned with those initially prescribed for FPIs under the Additional Disclosure Circular.

As per the Standard Operating Procedures for Offshore Derivative Instruments (“ODI SOP”) issued pursuant to the December 2024 Circular, certain exempt entities (identical to those under the Additional Disclosure Circular) are excluded from granular disclosure requirements, though grouping norms continue to apply to them. ODI subscribers and FPIs with common ownership or control are required to be grouped as a single investor group for applying the 10% investment cap and Size Criteria on an aggregate basis. Grouping of ODI subscribers is undertaken using the Legal Entity Identifier (LEI), while FPIs are grouped based on their FPI registration numbers, and such grouping is operationalised through the ODI-issuing FPI via its DDP/Indian custodian on the NSDL portal.

Granular disclosure requirements became operational from November 17, 2025. As ODI SOP clarifies, existing ODI subscribers breaching the 50% Concentration Criteria or Size Criteria as on that date are provided a 90-day realignment period until February 15, 2026, with shorter cure periods applicable for breaches occurring thereafter. New ODI subscribers are granted a one-time 90-day exemption from these criteria, post which breaches are subject to prescribed cure timelines, investment restrictions, and public disclosure obligations. Failure to realign exposures within the applicable timelines triggers an obligation to submit granular disclosures within 30 trading days, during which fresh equity ODI investments are restricted. Persistent non-compliance renders the ODI subscriber ineligible for future ODI subscriptions, requires liquidation of existing ODI positions within 180 days, and may be reported to SEBI for regulatory action. While ODI-issuing FPIs are not penalised for such failures, they are required to facilitate liquidation and notify SEBI where hedges cannot be unwound.

DECEMBER 17, 2025 – IMPLEMENTATION OF OTHER KEY REQUIREMENTS OF DECEMBER 2024 CIRCULAR

In addition to extending the granular disclosure framework to ODI subscribers, the amendments introduced in December 2024 Circular incorporated a few other key changes as set out below and a transition period of 1 year was provided to enable FPIs to align their structures and practices. Accordingly, these changes became effective from December 17, 2025.

• An FPI shall issue ODIs only through a separate dedicated FPI registration with no proprietary investments. Such FPI registration shall be in the name of the FPI with “ODI” as suffix under the same PAN;

• An FPI shall not issue ODIs with derivatives as reference/ underlying; and

• An FPI shall not hedge their ODIs with derivative positions on Stock Exchanges in India. Accordingly, ODIs shall only have securities (other than derivatives) as underlying and shall be fully hedged with the same securities on a one-to-one basis, throughout the tenure of the ODI.

december 1, 2025 - notified SWAGAT-FI for low-risk foreign investors

On December 1, 2025, SEBI notified amendments to the FPI regime through the SEBI (FPI) (Second Amendment) Regulations, 2025⁵ and SEBI (Foreign Venture Capital Investment) (Amendment) Regulation, 2000⁶ (collectively, “Amendment Regulations”) with a view to implementing the Single Window Automatic and Generalised Access for Trusted Foreign Investors (“SWAGAT-FI”) framework. At its core, SWAGAT-FI Framework consolidates FPI and Foreign Venture Capital Investment (“FVCI”) registrations, allowing investors to operate through a single window without duplicative approvals. These amendments follow the consultation paper dated August 8, 2025⁷, and the SEBI Board meeting held on September 12, 2025⁸, at which the proposals set out in the consultation paper were approved. Our detailed analysis of the consultation paper and the subsequent Board meeting is available here.

In the consultation paper and SEBI Board minutes, FVCIs granted SWAGAT-FI status were expressly exempted only from the requirement to invest at least 66.67% of investible funds in unlisted equity instruments, while the applicability of the 33.33% cap on investments in eligible listed and debt securities remained unclear. The Amendment Regulations have now clarified this position by expressly exempting SWAGAT-FIs from compliance with both the 66.67% and 33.33% investment limits. SEBI has prescribed a 6-month transition period for full implementation of the SWAGAT-FI Framework, in view of the system and process changes involved. Accordingly, the Amendment Regulations will come into force on June 1, 2026,

December 5, 2025 - Consultation Paper on Review of Master Circular for FPI and DDP

On December 5, 2025, SEBI issued a consultation paper proposing revisions to the Master Circular dated May 30, 2024, with a view to streamlining the regulatory framework and enhancing compliance efficiency. Since the issuance of the May 2024 Master Circular governing FPIs, DDPs, and Eligible Foreign Investors, SEBI has released several circulars affecting the FPI regime. This consultation paper proposes to consolidate these circulars into a revised Master Circular, rationalise and simplify the language, remove duplicative and transitory provisions, and ensure a cohesive and consistent regulatory framework for FPIs.

Key Takeaways and Priority Areas for Regulatory Refinement

The FPI framework continues to balance investor facilitation with regulatory oversight. While recent ODI-related reforms have significantly enhanced disclosure and compliance requirements, SEBI has also simultaneously introduced facilitative measures such as the SWAGAT-FI framework, the India Market Access Portal, and simplified investment routes for Indian Government Bonds to improve ease of doing business for foreign investors. The introduction of the SWAGAT-FI framework is of immediate relevance to market participants. Existing FPIs and FVCIs should reassess their status and consider transitioning to the new regime to benefit from reduced compliance, longer registration validity, and enhanced investment flexibility. In addition, fund sponsors and managers operating across domestic and IFSC platforms should revisit governance and structuring considerations to ensure alignment with the converging IFSC fund management regime. Overall, SWAGAT-FI is expected to provide a clearer, more predictable, and lower-touch regulatory pathway for established global capital to access Indian markets.

From a policy and market-practice perspective, entry-stage onboarding, post-registration processes, and ongoing compliance requirements warrant further refinement. While digitisation has progressed, procedural frictions and divergent practices among DDPs persist. Greater standardisation of turnaround timelines such as a 15 working-day timeline for FPI registration and a 5 working-day timeline for post-registration compliances along with end-to-end digital execution, video-based verification of authorised signatories, reduced reliance on duplicative documentation, and longer, harmonised timelines for reporting routine changes could materially enhance efficiency. In parallel, standardising KYC refresh cycles to once every 5 years across all FPI categories, fully digitalising post-registration filings, and improving the technical stability of depository and clearing corporation portals would reduce operational friction while maintaining supervisory effectiveness.

The ultimate beneficial ownership (“UBO”), granular disclosure, and investment-restriction framework continues to pose implementation challenges, particularly for regulated and widely held global funds. The current approach requires deep look-through disclosures, including 10% UBO identification for regulated overseas entities, and applies the 50% Concentration Criteria at an Indian corporate group level without reference to the investor’s overall India exposure. When coupled with strict realignment timelines, these requirements can result in mandatory disclosures, trading restrictions, or portfolio divestment even in cases of temporary or market-driven breaches. A more calibrated framework through broader exemptions for well-regulated jurisdictions and/or institutions and pooled vehicles, value-based or AUM-linked relief for smaller FPIs and ODI subscribers while applying the 50% Concentration Criteria, and flexible realignment supported by proportionate monetary consequences in case of non-compliance or compliance delay, rather than automatic liquidation could preserve transparency while reducing operational friction.

Separately, limited relaxation of the prohibition on parallel FPI and FDI investments, such as allowing limited post-listing FPI investments against pre-IPO FDI holdings, subject to an overall 10% cap, could enhance capital flexibility without weakening existing ownership and control safeguards.

Issues relating to market exit and enforcement also warrant closer attention. The FPI licence surrender and account closure process remain largely manual, with no prescribed timelines, creating uncertainty for investors seeking an orderly exit. Further, minor or technical compliance breaches may result in disproportionate consequences such as trading restrictions, licence suspension, or forced liquidation, even where regulatory risk is limited. A more balanced framework through full digitalisation of the exit process, a defined closure timeline (for example, 30 days subject to basic conditions), and a graduated enforcement approach that prioritises monetary penalties and corrective timelines over immediate suspension or cancellation could enhance compliance while reducing avoidable disruption to market participation and exit planning. Finally, tax certainty and administrative efficiency remain key determinants of foreign investor confidence in Indian capital markets. Existing inconsistencies in administration, procedural delays, and interpretational uncertainty in certain tax matters continue to add compliance friction. Greater consistency, faster digital processes, and clearer policy guidance could enhance predictability and support long-term foreign portfolio investment.

Authors

- Harit Gandhi, Akash Shirore, Chandrashekar K and Kishore Joshi

You can direct your queries or comments to the relevant member.

¹https://www.sebi.gov.in/reports-and-statistics/reports/may-2025/consultation-paper-on-proposal-to-facilitate-relaxation-in-regulatory-compliances-for-fpi-applicants-investing-only-in-indian-government-bonds_93906.html

²https://www.sebi.gov.in/media-and-notifications/press-releases/jun-2025/sebi-board-meeting_94657.html

³https://www.sebi.gov.in/legal/circulars/sep-2025/ease-of-regulatory-compliances-for-fpis-investing-only-in-government-securities_96549.html

⁴https://www.sebi.gov.in/media-and-notifications/press-releases/sep-2025/sebi-board-meeting_96601.html

⁵https://www.sebi.gov.in/legal/regulations/dec-2025/securities-and-exchange-board-of-india-foreign-portfolio-investors-second-amendment-regulations-2025_98144.html

⁶https://www.sebi.gov.in/legal/regulations/dec-2025/securities-and-exchange-board-of-india-foreign-venture-capital-investors-amendment-regulations-2025_98146.html

⁷https://www.sebi.gov.in/reports-and-statistics/reports/aug-2025/consultation-paper-on-introduction-of-single-window-automatic-and-generalised-access-for-trusted-foreign-investors-swagat-fi-framework-for-fpis-and-fvcis_95955.html

⁸https://www.sebi.gov.in/media-and-notifications/press-releases/sep-2025/sebi-board-meeting_96601.html