SEBI Considers Relaxing Additional Disclosure Rules For Foreign Portfolio Investors To Make Investing In Indian Stocks Easier

The Securities and Exchange Board of India (SEBI) is looking at its disclosure rules for foreign portfolio investors (FPIs). Could some funds soon get more room to invest in Indian stocks without having to reveal as much information about their investors?

Why Does SEBI Have Extra Disclosure Rules For FPIs?

SEBI’s FPI disclosure rules were introduced in August 2023. These followed allegations by US short-seller Hindenburg Research against the Adani Group. The aim was to make it harder for investors to hide behind layers of funds and companies. A promoter or a connected person can use foreign funds to potentially hide the extent of their ownership of a company. This could also help them circumvent minimum public shareholding requirements or regulations governing takeovers. The disclosures also help SEBI check whether investors are trying to bypass restrictions on investments from countries that share a land border with India.

Under the current rules, some FPIs must disclose details of the people who ultimately own or control their investments. This applies when more than 50% of their Indian equity investments are in a single company or corporate group. It also applies to funds with ₹50,000 crore or more invested in Indian equities.

But the rules can also affect funds that have no such intentions. Some investors choose to put most of their money into just one or two companies. Under the current framework, that strategy can trigger additional disclosure requirements.

What Changes Is SEBI Considering?

One proposal is to set a minimum shareholding threshold. If an FPI's holding in a company falls below that level, it may not have to make the additional disclosures, even if its portfolio is concentrated in a small number of stocks.

SEBI is also considering possible exemptions for funds that invest heavily in professionally managed companies with no identifiable promoters. Public sector undertakings could also be covered.

The idea is to avoid putting the same disclosure burden on every fund, regardless of its investment strategy or the risks involved.

SEBI has already made some changes to the framework. In April 2025, it raised the asset threshold that triggers additional disclosures from ₹25,000 crore to ₹50,000 crore. Certain categories of investors also have exemptions.

The latest proposals are still under consideration. We will know more once SEBI puts out the consultation paper and invites comments on the proposed changes.

Why Does This Matter For Foreign Investors?

For some funds, tracing every investor through multiple layers of ownership can be a lengthy process. Any relaxation could make compliance easier and give some foreign investors more flexibility when investing in Indian stocks.

There is also a risk of unwanted selling. A fund might cut its stake in a company simply to avoid triggering disclosure requirements. That could put pressure on the stock, even when the fund has no plans to exit for investment-related reasons.

SEBI's challenge is to make the rules less burdensome without creating gaps that investors could use to hide their holdings. For now, no relaxation has been finalised.

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