Research and Articles

• Introduction of the SWAGAT-FI framework for “trusted” low-risk investors, consolidating the FPI and FVCI regimes, extending registration validity, easing NRI/OCI/RI participation limits, and streamlining operations through a single-window system.

• Launch of the India Market Access Portal as a centralised information and facilitation platform.

• Amendments to FPI Regulations to align with Fund Management Regulations in International Financial Services Centres (“IFSCs”).

Introduction

The Securities and Exchange Board of India (“SEBI”) in its board meeting, dated September 12, 2025 (“Board Meeting”)¹, approved few key changes in the Foreign Portfolio Investors (“FPIs”) space, which are aimed at facilitating greater participation of low-risk foreign investors and streamlining regulatory processes.

Below is a summary of these key changes, along with our analysis:

a) SWAGAT-FI: SINGLE-WINDOW ACCESS FOR TRUSTED FPI AND FVCI INVESTORS:

Over the last few years, SEBI has worked towards aligning the regulatory regimes for FPIs and Foreign Venture Capital Investors (“FVCIs”). A significant step in this direction was the amendment of the Foreign Venture Capital Investors (FVCI) Regulations, 2000 (“FVCI Regulations”) on September 06, 2024². These amendments streamlined the FVCI registration process to bring it on par with the FPI framework by routing FVCI applications through Designated Depository Participants (“DDPs”), revised eligibility norms, stronger compliance monitoring, and mandatory disclosure of beneficial owners. Please see our analysis of this amendment here.

This broad alignment between the FVCI and FPI regimes has laid the foundation for SEBI’s latest initiative, viz. ‘Single Window Automatic & Generalised Access for Trusted Foreign Investors (SWAGAT-FI)’ framework for FPIs and FVCIs (“SWAGAT-FI Framework”). At its core, SWAGAT-FI Framework consolidates FPI and FVCI registrations, allowing investors to operate through a single window without duplicative approvals. Approved in SEBI’s Board Meeting, in furtherance to the consultation paper dated August 8, 2025³, the SWAGAT-FI Framework is designed to simplify and unify investment access for objectively identified, low-risk foreign investors. By consolidating processes, SEBI seeks to enhance ease of doing business, deepen India’s capital markets, and align regulatory practices with global standards.

The SWAGAT-FI Framework will be available only to low-risk investors. For this purpose, the eligible foreign investors shall include - (i) Government-related investors: central banks, sovereign wealth funds, international or multilateral organizations/agencies, and entities that are government controlled or at least 75% government owned; and (ii) Appropriately regulated Public Retail Funds (“PRFs”): mutual funds and unit trusts, insurance companies and pension funds. The definition of PRFs is aligned with the Explanation to Regulation 22(4) of the FPI Regulations. Collectively referred to as “SWAGAT-FIs”, these investors already account for more than 70% of total FPI Assets Under Custody (AUC) as of June 30, 2025. Their categorization as low-risk stems from the fact that they are either government-owned or widely held and are subject to regulation in their home jurisdictions.

Key Relaxations Proposed and our Analysis

The SWAGAT-FI Framework introduces several important reforms that fundamentally reshape the way FPIs and FVCIs interact with India’s regulatory system.

Harmonizing the FPI & FVCI Frameworks

At its core, the framework consolidates the two regimes, allowing SWAGAT-FIs to operate through a single window without the need for duplicative approvals. The framework introduces the option of simultaneous registration as both an FPI and an FVCI, without requiring any additional documentation. Eligible applicants can seek SWAGAT-FI status at the time of their initial registration, while existing FPIs that meet the prescribed eligibility criteria will also have the option of converting to SWAGAT-FI status. This unified approach enables SWAGAT-FIs to invest in listed equity instruments and debt securities of Indian companies in their capacity as FPIs, while simultaneously investing in unlisted Indian companies engaged in specified sectors and start-ups as FVCIs.

Currently, the FVCI Regulations require at least 66.67% of the FVCI’s investible funds to be deployed in eligible unlisted equity shares or equity-linked instruments, with up to 33.33% of FVCI’s investable fund permitted in eligible listed and debt securities. The SWAGAT-FI Framework introduces a major relaxation by removing the 66.67% minimum allocation requirement.

This effectively means that SWAGAT-FIs are no longer bound to invest at least 66.67% in unlisted instruments and may allocate a smaller proportion under the FVCI route. However, the 33.33% cap on investible funds in eligible listed and debt securities appears to remain applicable, as the framework does not explicitly address it. Assuming this cap continues, SWAGAT-FIs will need to ensure that, at the end of the fund’s life cycle, the 33.33% ceiling on eligible listed and debt securities is not breached.

This change enables SWAGAT-FI, holding both FPI and FVCI licenses, to allocate consolidated funds more flexibly between listed and unlisted securities in line with its investment strategy. Investors can now dedicate a larger portion of capital to listed securities via either the FPI or FVCI route, without being constrained by the unlisted threshold. This relaxation enhances portfolio flexibility, facilitates exits through listed markets, reduces the lock-in risk typically associated with unlisted assets, and simplifies compliance by removing the need to monitor the 66.67% minimum requirement. Overall, this reform makes the FVCI route more investor-friendly, bringing it closer to global best practices and enabling foreign investors to optimize their India investment strategy more effectively.

Another important aspect to consider is whether an entity holding both FPI and FVCI registrations under the SWAGAT-FI Framework would be eligible to invest in a listed company under the FPI route, where such entity had earlier acquired shares of the same company (when unlisted) under the FVCI route, and the company has subsequently undertaken an IPO and become listed. This question may arise considering that, under the Foreign Exchange Management (Non-debt Instruments) Rules, 2019⁴ (“NDI Rules”), an investor is not permitted to hold investments in the same Indian company simultaneously under both the FDI and FPI routes, and investments made under the FVCI route are generally regarded as a sub-set of the FDI framework. While the entity which made FVCI investments in an Indian company prior to its IPO should technically be permitted to subsequently invest in the same company under the FPI route, an explicit clarification from the regulators on this would provide regulatory certainty.

Extended Registration & KYC Cycle

In terms of registration validity, KYC review, and fee payment, the SWAGAT-FI Framework substantially reduces the compliance burden. The validity of FPI registration, periodic KYC review, and payment of fees has been extended from 3 (three) years to 10 (ten) years. This longer validity period reduces the frequency of renewals, provides greater certainty to SWAGAT-FIs, and lowers administrative costs.

Single Demat Account

From the perspective of demat holding of securities, foreign investors investing through different routes such as FPI, FVCI, etc. are currently required to maintain separate demat accounts for securities acquired under each route. This segregation is intended to prevent co-mingling of securities and to facilitate effective monitoring and supervision. Under the SWAGAT-FI Framework, SWAGAT-FIs are now given an option to operate a single demat account to hold securities acquired as an FPI, as an FVCI, or as investment in the units of investment vehicles under Schedule VIII of NDI Rules. To address concerns around co-mingling, the framework mandates that depositories put in place back-end tagging solutions that can clearly identify securities acquired under each route.

Such tagging is crucial because the regulatory treatment differs across investment routes. For instance, the FPI framework explicitly requires that securities held under the FPI route remain free from encumbrances. In contrast, no such explicit condition is prescribed for FVCI investments or for units held in the investment vehicles. This shift to a single demat account is expected to reduce duplication of onboarding and KYC processes, thereby easing compliance for investors. By transferring the responsibility of monitoring the holdings to the depositories, the framework creates a more investor-friendly system. At the same time, the enhanced transparency in tracking investment flows, while beneficial for systemic oversight, may also lead to heightened regulatory scrutiny.

Relaxation for NRI/OCI/RI Participation

Another significant relaxation under the framework relates to participation by Non-Resident Indians (“NRIs”), Overseas Citizens of India (“OCIs”), and Resident Indian (“RI”) individuals. The SEBI (FPI) Regulations, 2019 (“FPI Regulations”) caps aggregate contributions by these categories of investors in an FPI at 50% of the total corpus. However, given that SWAGAT-FIs are either government-owned or widely held and are regulated in their home jurisdictions, such concentration risks are minimal. Additionally, restriction on participation by NRI, OCI or RIs is not applicable in case of FVCIs. SEBI has therefore removed the 50% cap on aggregate contributions from NRIs, OCIs, and RIs in SWAGAT-FIs. This change provides greater structuring flexibility while maintaining confidence in the low-risk nature of SWAGAT-FIs.

Trust but Verify approach

Further, the SWAGAT-FI Framework presently applies only to government-related investors and appropriately regulated public retail funds. SEBI has proposed to publish jurisdiction-wise lists of eligible fund structures under a trust-but-verify approach, consistent with the Additional Disclosure Framework dated August 24, 2023.⁵ This initiative is expected to broaden SWAGAT-FI eligibility to encompass other widely held, globally regulated fund structures (e.g., SEC-registered funds, MAS-regulated VCCs). Entities within such approved structures will be able to obtain SWAGAT-FI status with streamlined disclosures, thereby enhancing regulatory clarity while ensuring that only transparent and well-supervised funds benefit from the regime.

Implementation Timeline

SEBI has prescribed a six-month timeline for the full implementation of the SWAGAT-FI Framework, given the system and process changes it entails. The reforms will be operationalized through corresponding amendments to the FPI and FVCI Regulations, which are expected to be notified within this period. Accordingly, the relaxations will take effect from the date the respective regulations are amended. At present, SEBI has only set out the broad contours of the regime; the detailed procedural requirements, compliance obligations, and operational guidelines will be clarified through the formal amendments and any supplementary guidance to be issued in due course.

 b) ‘INDIA MARKET ACCESS’ WEBSITE FOR FPIS

At the Board Meeting, SEBI noted the launch of a new website titled ‘India Market Access’ (www.indiamarketaccess.in), developed as a dedicated digital gateway for current and prospective FPIs. The website has been developed jointly by India’s Market Infrastructure Institutions, including NSE, BSE, ICCL, NSE Clearing, CDSL and NSDL, under SEBI’s guidance. This initiative responds to long-standing feedback from global investors who highlighted challenges in navigating India’s fragmented regulatory landscape and accessing information spread across multiple institutions.

It aims to serve as a single-window platform offering step-by-step guidance on FPI registration through the Common Application Form (“CAF”), documentation requirements, applicable SEBI and Reserve Bank of India (“RBI”) regulations, taxation and repatriation norms, and details of roles and responsibilities of key market participants in the FPI ecosystem. By consolidating information into a user-friendly interface, the portal is expected to significantly enhance transparency, streamline compliance, and improve ease of doing business for foreign investors seeking access to Indian securities markets.

c) SEBI AMENDS FPI REGULATIONS TO ALIGN WITH FM REGULATIONS

When the FPI Regulations were first introduced, AIFs in IFSC were governed by SEBI’s operational guidelines⁶ which were based on SEBI (AIF) Regulations, 2012. Subsequently, International Financial Services Centres Authority (“IFSCA”) introduced the IFSCA (Fund Management) Regulations, 2022, and later refined the framework through the IFSCA (Fund Management) Regulations, 2025 (“FM Regulations”). This led to certain inconsistencies between the FPI Regulations, which continued to reflect the earlier framework of SEBI’s operational guidelines, and FM Regulations. Amongst other changes, SEBI has approved amendments to the FPI Regulations to resolve these misalignments. These changes follow the consultation paper issued on August 8, 2025.

Alignment of FPI Regulations with FM Regulations

Presently, the second proviso to Regulation 4(c) of the FPI Regulations allows resident Indians (other than individuals) to be constituents of an FPI applicant in capacity of sponsor or manager if the applicant is an AIF in IFSC (Category I, II, or III). However, under the FM Regulations, the manager of an AIF, i.e., the Fund Management Entity (“FME”), is required to be located in the IFSC and is therefore treated as a non-resident under FEMA. Further, the concept of a ‘sponsor’ does not exist under FM Regulations. As a result, at present, no resident Indians (other than individuals) are eligible to be constituents of an AIF FPI applicant.

To harmonize FPI Regulations with the FM Regulations, SEBI has approved to amend the FPI Regulations to replace the “sponsor/manager” terminology with “Fund Management Entity or its associate⁷,” mirroring IFSCA’s language. While the FME itself does qualify as a resident Indian, its resident Indian Associates are now permitted to be constituents of an AIF FPI applicant.

Moreover, the second proviso to Regulation 4(c) of the FPI Regulations also provides that the sponsor or manager is required to maintain contribution in the AIF at the lower of (i) in case of Category I or Category II AIF, 2.5% of corpus or USD 750,000; and (ii) ) in case of Category III AIF, 5% of corpus or USD 1.5 Mn; anything lower or higher than this renders these FPIs non-compliant. On the other hand, the FM Regulations prescribe flexible limits on the amount required to be contributed by ‘FMEs or their associates’ (“FME Contribution”) for different AIFs. Specifically, for FMEs, having Indian residents as ultimate beneficial owners, or their associates the amount required to be contributed is capped at 10% of the targeted corpus of the AIF. To align the FPI Regulations with FM Regulations, SEBI has approved amendments to allow Contribution up to 10% of the corpus of the AIF.

Registration of Retail Schemes as FPIs

Further, SEBI has approved a proposal to allow Retail Schemes⁸ in IFSCs, where the FME or its associates of Retail Scheme are Indian residents, to register as FPIs. The FME Contribution in a Retail Scheme FPI applicant is capped at 10% of the Assets Under Management (AUM) of the Retail Scheme.

Operationalisation of Indian Mutual Fund Investments in Overseas MFs/UTs

SEBI, through its circular dated November 4, 2024⁹, permitted Indian mutual fund schemes to invest in overseas mutual funds or unit trusts with exposure to Indian securities, subject to certain conditions. To operationalise this framework, SEBI has now approved amendments to the FPI Regulations, 2019. As a result, overseas MFs/UTs registering as FPIs will be permitted to include Indian mutual funds as their constituents, provided they comply with the conditions such as pari-passu rights, transparency in pooling, and independence of investment managers. Previously, mutual funds faced restrictions due to control and contribution limits, especially when investing in FPIs with Indian exposure. The new framework enables Indian mutual funds to diversify globally while still participating in India-linked portfolios. This is particularly relevant for funds seeking exposure to Indian equities via offshore vehicles.

CONCLUSION

SEBI’s recent approvals mark a significant step toward liberalising and streamlining India’s FPI framework. The introduction of the SWAGAT-FI Framework, the launch of the India Market Access Portal, and the alignment of FPI Regulations with the IFSC frameworks are designed to create a more cohesive and investor-friendly regime. Collectively, these measures aim to simplify compliance, reduce regulatory friction, and broaden the pool of eligible investors. Importantly, they also signal India’s intent to deepen its capital markets, attract long-term global capital, and strengthen its position as a globally competitive investment destination.

Authors

Akash Shirore, Chandrashekar K, Radhika Parikh and Kishore Joshi

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

¹https://www.sebi.gov.in/media-and-notifications/press-releases/sep-2025/sebi-board-meeting_96601.html

²https://www.sebi.gov.in/legal/regulations/sep-2024/securities-and-exchange-board-of-india-foreign-venture-capital-investors-amendment-regulations-2024_86505.html

³ https://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

⁴https://enforcementdirectorate.gov.in/sites/default/files/Act%26rules/Foreign%20Exchange%20Management%20%28Non-Debt%20Instrument%29%20Rules%2C%202019%20-%20without%20amendment_2.pdf

⁵https://www.sebi.gov.in/legal/circulars/aug-2023/mandating-additional-disclosures-by-foreign-portfolio-investors-fpis-that-fulfil-certain-objective-criteria_75886.html

⁶https://ifsca.gov.in/web/viewer.html?file=/Document/Legal/30-sebi-_-operating-guidelines-for-alternative-investment-funds-in-international-financial-services-centres13102020023659.pdf

⁷Definition of associate, regulation 2(1)(d), FM Regulations.

⁸Definition of retail scheme, regulation 2(1)(ff), FM Regulations.

⁹https://www.sebi.gov.in/legal/circulars/nov-2024/investments-in-overseas-mutual-funds-unit-trusts-by-indian-mutual-funds_88198.html