YOU ARE ON THE NEW NSE WEBSITE, ACCESS THE OLD WEBSITE ON THE URL www1.nseindia.com

10-Feb-2023 | 82.5800

08-Feb-2023

Login to

You will be redirected to
another link to complete the login

Feedback
Login to Exchange, Mutual Fund, NCFM

Getting Started

Thank you for your interest in investing in India.

India welcomes foreign investment from following classes of investors:

  • Foreign Portfolio Investors (FPIs)
  • Non Resident Indians (NRIs) / Persons of Indian Origin (PIO)

As per SEBI (Foreign Portfolio Investors) Regulations 2014 promulgated and implemented w.e.f. June 1, 2014,

  • The onus of registration has moved from SEBI to Designated Depository Participants (DDP)
  • Access to investment in India is rationalised & harmonised
  • KYC requirements harmonised in line with FPI regulations
  • Registration as FPI available under the following three categories based on the perceived risk
Category I Category II Category III

Govt. and Govt. related foreign investors such as Foreign Central Banks, Governmental Agencies, Sovereign Wealth Funds, International / Multilateral Organizations/ Agencies

  • Appropriately regulated broad based funds such as Mutual Funds, Investment Trusts, Insurance / Reinsurance Companies, Other Broad Based Funds etc .

  • Appropriately regulated entities such as Banks, Asset Mgmt. Cos, Investment Managers/ Advisors, Portfolio Managers etc.

  • Broad based funds whose investment manager is appropriately regulated

  • University Funds and Pension Funds

  • University related Endowments already registered with SEBI as FII/Sub Account

All other Foreign Investors investing in India under PIS route, not eligible under Category I and II such as Endowments, Charitable Societies / Trust, Foundations ,Corporate Bodies, Trusts, Individuals, Family Offices, etc.

 

In the interests of investor convenience, we have invited KPMG to provide an overview of the FPI - Regulatory and Tax regime.

NOTE: NOTE: FOR DOWNLOADING THE DOCUMENT YOU WILL BE DIRECTED TO A "TERMS OF USE", WHICH YOU NEED TO ACCEPT, FOR DOWNLOAD TO COMMENCE.

Download presentation on FPI-Regulatory and Tax Regime (.pdf)

While every effort has been taken to make this overview relevant, we encourage you to take independent legal and tax advice before investing in India. Rules and regulations change, and while it is our intention to keep this overview updated, NSE and KPMG do not warrant the completeness and accuracy of this information.

Other useful links:

 

FPI Investment

FPIs are allowed to trade in Equities (Capital Market), Equity Derivatives, Government Securities, Debt Instrument and Interest Rate Derivatives on the Exchange platform.

Investment limits for FII/sub-account for various instruments are given below:-

  • The purchase of equity shares of each company by a single FPI or an investor group shall be below 10% of the total issued capital of the company.
  • Aggregated Equity Investment Limit – The individual ceiling of below 10 percent by a single FPI or an investor group is subject to an overall investment ceiling for total FII investment of 24 percent of the total paid-up equity capital of a company (20 percent in the case of public sector banks) The overall ceiling of 24 percent can be raised up to the sectoral limit if the concerned company passes a resolution by its Board of Directors in the General Body Meeting. Exceptions to these limits apply to individual companies and sectors.

IPO

  • FPIs can invest under the quota reserved for QIB (Qualified Institutional Buyers) in the IPOs within the overall limits for foreign investments as defined in the Equities segment
  • Non-Resident Indians required to open bank account (NRE/NRO) with designated Bank and Demat Account with an NBFC to hold shares and execute buy/sell orders

OFS

  • FPIs can bid under the non-retail quota with the overall ceilings as defined under the Equities segment
  • Non-Resident Indians can bid under the Non-Institutional Investors Category; discount applicable to retail investors will not be extended under this category

The FPI position limits for various categories of products and client as per the table below:

Products FPI Category I & II FPI Category III
Index Futures & Options Position Limit is Higher of INR 5 Bn. or 15% of the total Open Interest in the market on an Index for Futures Options separately. 
In addition to the above, FPIs may take exposure in equity index derivatives provided that: 
  • Short positions in index derivatives (short futures, short calls and long puts) shall not exceed (in notional value) the FIIs holding of stocks.
  • Long positions in index derivatives (long futures, long calls and short puts) shall not exceed (in notional value) the FIIs holding of cash, government securities, T-Bills and similar instruments.
A person or persons acting in concert together own 15% or more of Open Interest on a particular index are required to report to the exchange
Stock F&O (Stocks with MWPL > INR 5 Bn.) Combined F&O Position Limit - 20% of MWPL or INR 3 Bn., whichever is lower and,

Stock Futures Position Limit - 10% of MWPL or INR 1.5 Bn., whichever is lower
The gross open position across all the derivative contracts on a security, should not exceed higher of:

 

  • 1% of free Float market cap, or
  • 5% of Open Interest in all Derivatives
Stock F&O (Stocks with MWPL < INR 5 Bn. ) Combined F&O Position Limit - 20% of MWPL, 

Stock Futures Position Limit - 20% of MWPL or INR 0.5 Bn whichever is lower

In accordance with the revised Medium Term Framework (MTF) for FPI limits in Government securities issued vide RBI Notification RBI/2015-16/198 A.P. (DIR Series) Circular No 19 dated October 6, 2015, the main features are:

    •  
      • The limits for FPI investment in debt securities will henceforth be announced/ fixed in Rupee terms.
      • The limits for FPI investment in the Central Government securities will be increased in phases to reach 5 per cent of the outstanding stock by March 2018. In aggregate terms, this is expected to open up room for additional investment of Rs. 1,200 billion in the limit for Central Government securities by March 2018 over and above the existing limit of Rs. 1,535 billion for all Government securities.
      • Additionally, there will be a separate limit for investment by all FPIs in the State Development Loans (SDLs), to be increased in phases to reach 2 per cent of the outstanding stock by March 2018. This would amount to an additional limit of about Rs. 500 billion by March 2018.
      • The effective increase in limits for the following two quarters will be announced every half year in March and September.
      • The existing requirement of investments being made in G-sec (including SDLs) with a minimum residual maturity of three years will continue to apply to all categories of FPIs.
      • Aggregate FPI investments in any Central Government security would be capped at 20% of the outstanding stock of the security. Investments at existing levels in the securities over this limit may continue but not get replenished through fresh purchases by FPIs till these fall below 20%.

      Accordingly, for the current financial year, it has been decided to enhance the limit for investment by FPIs in Government Securities in two tranches from October 12, 2015 and January 1, 2016 respectively as under:

        Rs. Crores
        For all FPIs Additional for 
      Long Term FPIs
      Total For all FPIs 
      (including Long Term FPIs)
      Aggregate
      Existing Limits 1244 291 1535 Nil 1535
      Revised limits with effect from October 12, 2015 1299 366 1665 35 1700
      Revised limits with effect from January 1, 2016 1354 441 1795 70 1865

      The security-wise limit for FPI investments will be monitored on a day-end basis and those Central Government securities in which aggregate investment by FPIs exceeds the prescribed threshold of 20% will be put in a negative investment list. No fresh investments by FPIs in these securities will be permitted till they are removed from the negative list. There will be no security-wise limit for SDLs for now.

      All other existing conditions, including investment of coupons being permitted outside the limits and investments being restricted to securities with a minimum residual maturity of three years, will continue to apply.

  • FPIs may take long as well as short positions up in USDINR pair up to USD 15 Million per exchange without having any underlying exposure.

  • In addition, FPIs have been allowed to take long (bought) as well as short (sold) positions in EURINR, GBPINR and JPYINR pairs, all put together, up to USD 5 million equivalent per exchange without having any underlying exposure.

  • FPIs cannot take short positions beyond the above limits for each currency pair.

 

FPI Category USDINR EURINR GBPINR JPYINR
Category I&II Higher of 15% of the total open interest or USD 100 million Higher of 15% of the total open interest or EUR 50 million Higher of 15% of the total open interest or GBP 50 million Higher of 15% of the total open interest or JPY 2000 million
Category III Higher of 6% of total open interest or USD 10 million Higher of 6% of total open interest or EURO 5 million Higher of 6% of total open interest or GBP 5 million Higher of 6% of total open interest or JPY 200 million

The FPI can take long positions beyond these limits in each of the currency pairs subject to having underlying exposure. These limits are as follows

In case of Foreign Institutional Investors, registered with Securities and Exchange Board of India, the total gross long (bought) position in cash and Interest Rate Futures markets taken together should not exceed their individual permissible limit for investment in government securities and the total gross short (sold) position, for the purpose of hedging only, should not exceed their long position in the government securities and in Interest Rate Futures, at any point in time.

The total gross long (bought) position in cash and IRF markets taken together for all FPIs shall not exceed the aggregate permissible limit for investment in government securities for FPIs

Updated on: 15/07/2019