Govt bond push: Sebi eases compliance rules for G-Sec FPIs, KYC norms and disclosure timelines relaxed

Time of India

5 hours ago

In a move aimed at boosting long-term foreign investment in Indian debt markets, Sebi on Wednesday approved several compliance relaxations for Foreign Portfolio Investors (FPIs) that invest exclusively in Indian government securities (G-Secs).
The decision, taken at the regulator's board meeting, is expected to simplify onboarding, reduce paperwork, and improve ease of doing business for these investors at a time when global interest in India's debt market is rising.
'With an objective to enhance ease of doing business through a risk-based approach and optimum regulation, the board approved the proposal to relax certain regulatory requirements for all existing and prospective FPIs that exclusively invest in G-Secs,' Sebi said in a statement, PTI reported.
Currently, FPIs invest in Indian debt through the General route, the Voluntary Retention Route (VRR), and the Fully Accessible Route (FAR). Both FAR and VRR allow investments with minimal restrictions.
As part of the new measures, Sebi said KYC review timelines for G-Sec FPIs will now be aligned with Reserve Bank of India (RBI) norms, resulting in fewer periodic compliance requirements. Moreover, those investing via the FAR route will no longer need to disclose investor group details.
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The regulator also decided to allow Non-Resident Indians (NRIs), Overseas Citizens of India (OCIs), and Resident Indian individuals to be part of such government securities-focused FPIs (GS-FPIs), without the restrictions that typically apply to other FPI categories. However, existing rules under the Liberalised Remittance Scheme and limits for global funds with less than 50% Indian exposure will continue to apply.
In another easing of norms, Sebi set a uniform 30-day window for reporting all material changes by such investors, replacing the current requirement that varies between 7 and 30 days depending on the type of change.
Sebi said these changes would apply during onboarding and any future transition between GS-FPI and other FPI categories, subject to conditions that may be specified by the regulator.
India's inclusion in global bond indices such as those by JP Morgan, Bloomberg, and FTSE is expected to draw greater foreign interest in G-Secs. According to Sebi data, FPI investment in FAR-eligible bonds had already crossed Rs 3 lakh crore ($35.7 billion) by March 2025.
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