SEBI Plans FPI Compliance Review, Puts Market Integrity at Centre of Reforms

Chairman Tuhin Kanta Pandey says the regulator will seek feedback on foreign investor requirements while examining SME listings, fundraising oversight and market infrastructure.

The Securities and Exchange Board of India will issue a consultation paper to review compliance requirements for foreign portfolio investors, Chairman Tuhin Kanta Pandey said, outlining an effort to make market access simpler while maintaining investor safeguards.

Speaking at the Business Standard BFSI Insight Summit in Mumbai on October 28, Pandey said Indian regulations should continue to be assessed against international practices. He pointed to faster onboarding and changes to trading arrangements, while acknowledging that some operational barriers remain.

The proposed consultation will seek feedback on those requirements. It does not, by itself, change the rules currently applicable to overseas investors.

Easier access does not guarantee foreign inflows

Pandey distinguished between the regulator’s responsibility to maintain efficient markets and an investor’s decision to allocate money to India.

In the interview published by Business Standard, he explained that investment decisions depend on earnings prospects, competing opportunities and expectations about the future. Regulatory improvements can make participation easier, but they cannot determine where global funds invest.

For market participants, that distinction is significant. A compliance review may reduce administrative friction without necessarily reversing foreign selling or changing the relative appeal of Indian equities.

Pandey’s broader message was that investors should be able to enter, trade and exit with confidence, supported by transparent systems, reliable infrastructure and cybersecurity.

Net settlement targeted for December

One operational change concerns net settlement of funds for eligible FPI transactions in the cash market.

SEBI’s framework is intended to reduce the funding burden associated with settling eligible transactions. In simple terms, netting allows qualifying payment obligations to be offset when calculating the funds required for settlement, subject to the framework’s conditions.

An official SEBI board document set implementation for on or before December 31, 2026. Pandey also referred to December implementation during the summit.

The timing matters: approval of a framework and its operational launch are separate developments. Investors should follow the applicable circulars and implementation instructions when assessing which transactions qualify.

Pandey also highlighted changes to the block-window framework and the introduction of closing auctions. On onboarding, he said some FPIs had recently completed registration in five days. That was an example of processing achieved in certain cases, rather than a guaranteed timeline for every applicant.

SME review focuses on access and progression

SEBI is also examining whether the small and medium enterprise listing framework provides a workable route for promising businesses to raise public capital and eventually move to the main board.

Pandey identified issuance costs, corporate standards and migration incentives as areas requiring attention. His remarks suggest the review will need to balance easier fundraising with the additional governance and disclosure responsibilities that accompany growth.

For a smaller company, obtaining a listing is only one stage of that process. Building the reporting systems and governance needed for a larger public-market presence is another.

Pandey also raised the importance of independent monitoring of money raised from investors. Such oversight needs sufficient independence to assess whether proceeds are being used for their stated purposes.

Exchange self-listing remains a possibility, not an active proposal

On allowing stock exchanges to list their shares on their own platforms, Pandey indicated that SEBI could consider international approaches and safeguards.

The central issue is a conflict of interest: an exchange performs supervisory functions, creating complications when its own shares trade on the market it oversees.

However, his remarks did not announce a policy change or a consultation timetable. Self-listing remains a possibility for consideration rather than an initiative currently being actively pursued.

What investors and issuers should watch next

The next substantive development will be the FPI consultation paper. Its detailed proposals will show which requirements SEBI wants to revise, who would benefit and what safeguards would remain.

For smaller businesses, the important questions concern fundraising costs, disclosure obligations and the conditions for moving to the main board.

Across these initiatives, Pandey’s stated priority is a market that mobilises capital efficiently while preserving confidence in how it operates. The practical impact will depend on the final rules and their implementation.