The Securities and Exchange Board of India plans to review foreign investor rules to align them with global standards.
Why Is SEBI Reviewing Foreign Investor Regulations?
The Securities and Exchange Board of India (SEBI) will examine compliance requirements for foreign portfolio investors (FPIs) and issue a consultation paper seeking views on bringing Indian regulations closer to international standards.
SEBI Chairman Tuhin Kanta Pandey announced the proposed review while addressing the annual Business Standard BFSI Insights Summit in Mumbai on October 28.
Pandey acknowledged that certain compliance requirements in India remain more demanding than those in other major financial markets. He said the regulator intends to simplify these requirements while maintaining safeguards for investor protection and market integrity.
The initiative is intended to encourage greater foreign investment as India seeks to expand its capital markets and attract additional financing for businesses.
What Measures Has SEBI Already Introduced?
SEBI has undertaken several reforms to make Indian markets more accessible to international investors. These include simplifying market entry procedures, improving digital onboarding and reducing administrative requirements. The regulator has also aligned several compliance provisions with practices followed in major international financial centres.
Pandey indicated that the proposed consultation would examine remaining differences between Indian requirements and global standards. However, regulatory changes would need to preserve transparency, investor confidence and market stability.
The review forms part of efforts to widen participation in India’s financial markets and improve access to domestic and international capital.
Can Stock Exchanges List Their Own Shares?
Pandey also addressed the possibility of allowing stock exchanges to list their shares on their own trading platforms. He said the proposal was not currently under active consideration, although the matter could be revisited with appropriate safeguards.
Self-listing is permitted in several international markets. However, India’s regulatory framework differs because multiple exchanges operate within the country, raising potential conflicts of interest.
Pandey observed that exchanges also perform regulatory functions, making independent oversight important when their own securities are traded.
He also discussed the possible revival of regional exchanges, including the Calcutta Stock Exchange. While existing regulations do not prohibit new exchanges, he emphasised that commercial viability, sufficient trading volumes and continuous technological investment would be essential.
What Does This Mean for India’s Capital Markets?
Pandey highlighted the growing importance of domestic savings alongside international investment in supporting India’s financial development. India’s market capitalisation-to-GDP ratio has increased from 69% in FY16 to approximately 130% currently, reflecting the expansion of equity markets.
Outstanding corporate bonds have reached nearly ₹61 lakh crore, equivalent to approximately 55% of bank credit extended to industry and services.
According to Pandey, the next phase of market development must focus on expanding financing opportunities for businesses, strengthening investor participation and maintaining resilient markets.
The proposed FPI compliance review reflects SEBI’s effort to balance easier international market access with effective regulatory supervision. Its eventual impact will depend on the changes proposed following consultation and the safeguards retained to protect investors and market integrity.
