SEBI to Review FPI Compliance Norms and Align with Global Standards

The Securities and Exchange Board of India (SEBI) is reviewing compliance requirements for foreign portfolio investors (FPIs). SEBI Chairman Tuhin Kanta Pandey stated that the regulator will issue a consultation paper to seek views on aligning Indian norms with global standards, while retaining necessary safeguards for investor protection and market integrity.

Speaking at the annual Business Standard BFSI Insights Summit, Pandey acknowledged that certain compliance requirements in India remain more onerous compared to other major jurisdictions. The examination of existing norms is intended to facilitate greater foreign investor participation in domestic markets.

This initiative aligns with broader efforts to deepen India's capital markets and widen the pool of domestic and international capital to meet growing financing requirements. SEBI has previously taken steps to ease foreign investor participation, including streamlining market access, simplifying procedures, and harmonising select compliance requirements with global jurisdictions.

Addressing the topic of stock exchanges listing on their own platforms, Pandey noted that the matter is neither off the table nor actively under consideration. While self-listing exists in other global markets, India's multi-exchange model requires careful handling of potential conflicts of interest where an exchange also acts as a regulator. He added that the issue could be revisited with appropriate safeguards.

On the potential revival of closed regional exchanges, such as the Calcutta Stock Exchange, Pandey stated that the regulatory framework does not rule out new exchanges, but commercial viability remains crucial. With electronic trading allowing access from across the country and abroad, exchanges must demonstrate the ability to attract sufficient trading volumes and make continuous investments in technology to manage emerging risks.

Pandey highlighted that domestic savings remain a foundational element for market development, with international participation serving to expand capital availability and bring expertise. India's market capitalisation-to-GDP ratio has increased from 69 percent in FY16 to approximately 130 percent currently. Additionally, outstanding corporate bonds have reached nearly Rs 61 lakh crore, which is equivalent to about 55 percent of bank credit to industry and services.

The next phase of market development will concentrate on expanding financing opportunities for businesses, deepening investor participation, and ensuring that markets remain fair, resilient, and trustworthy.

"Simplifying compliance requirements for foreign portfolio investors is a necessary step toward attracting deeper international capital into India's growing financial markets. As the market capitalisation-to-GDP ratio continues to expand, easing entry barriers while maintaining robust regulatory safeguards will help build a more globally competitive ecosystem for both businesses and investors." — Dr. Shishir Gupta, Founder & CEO, StartupLanes