SEBI’s New Proposal: A Golden Gateway for Indian Investors to Global Markets

Latest Update

The Securities and Exchange Board of India (SEBI) has proposed a set of reforms to make Foreign Portfolio Investment (FPI) more accessible for resident Indian investors. Public feedback on this proposal is open until 29 August 2025. If approved, it could allow smaller institutions and retail investors to participate in global equity markets more easily.

What Exactly is FPI?

Foreign Portfolio Investment (FPI) means investing indirectly in overseas assets—such as shares, bonds, or mutual funds—through a registered fund or institution.

• Example: Imagine a fund uses your money to buy Apple shares from the US, Toyota shares from Japan, and BMW shares from Germany—that’s FPI in action.

How Do Indians Invest in Foreign Markets Right Now?

1. Large Institutions

• Who: Mutual funds, insurance companies, pension funds, large banks.
• How: They invest abroad through the FPI route.
• Your Access: If you invest in an international scheme of an Indian AMC (like HDFC or SBI Mutual Fund), your money is indirectly invested overseas.

2. Retail Investors

• How: Through the Liberalised Remittance Scheme (LRS), which allows direct purchase of foreign shares/ETFs.
• Platforms: LRS-based platforms such as certain fintech apps and websites (examples: Groww, INDmoney, Vested).
• Limit: $250,000 (~₹2 crore) per year.
• Note: You decide exactly which shares to buy, and the order is executed via a foreign broker partner.

LRS-based Platforms vs. FPI – The Key Differences

Criteria	LRS-based Platforms (e.g., fintech apps like Groww, INDmoney, Vested)	FPI Investment
Route	LRS (Liberalised Remittance Scheme)	SEBI-registered FPI
Type of Investment	Direct purchase of foreign shares/ETFs	Pooled investment via a fund
Control	Investor chooses what to buy	Fund manager decides
Limit	$250k/year	Different rules, often higher limits
Investor Profile	Individual retail investors	Institutions + retail (after new proposal)

What’s Special About SEBI’s New Proposal?

1. Inclusion of Smaller Institutions and Retail Schemes

Retail-focused schemes operating in places like GIFT City (Gujarat) could register as FPIs, provided they are managed by Indian-owned companies.

• Example: A small fintech could launch “India Global Fund” as an FPI, invest in markets like the US, Europe, and Japan, and let you join with as little as ₹5,000.

2. Higher Investment Limits

Currently, Indian institutional investors can only hold 2.5–5% in any single foreign fund. SEBI proposes raising this to 10%.

• Example: In a ₹100 crore foreign fund, the maximum Indian investment could go from ₹2.5–5 crore to ₹10 crore.

3. A New Path for Mutual Funds

Indian mutual funds will have more flexibility to invest in FPIs, allowing retail investors to gain foreign exposure without using LRS.

4. Transparency and Safety

Investors will get detailed disclosures about which companies the fund invests in, returns generated, and associated risks.

How Will Investors Benefit?

• New Opportunities: Access to global markets beyond Indian equities.
• Diversification: Investments spread across different countries reduce risk.
• Easier Access: Even small-ticket retail investors could join global investments without complex procedures.

Quick Comparison – Before vs. After

Before	After New Proposal
FPI access mainly for large institutions	Small institutions and retail-focused schemes included
Lower investment cap in foreign funds	Limit increased to 10%
Limited mutual fund options for global exposure	Mutual funds can directly invest in FPIs

Outcome

SEBI’s move could open the doors of global markets wider for Indian investors. What was once a playground for big institutions may now welcome smaller funds and retail participants. This could help Indian portfolios become stronger, more diverse, and better positioned to handle global opportunities and risks.