Sebi Considers Daily Net Settlement for Foreign Portfolio Investors

The Securities and Exchange Board of India (Sebi) is exploring a potential change that could greatly benefit foreign portfolio investors (FPIs). The proposed shift would allow FPIs to settle all equity trades on a net basis at the end of each trading day. Chairperson Tuhin Kanta Pandey announced this consideration during the Goldman Sachs 14th India CIO Conference 2025, highlighting that this adjustment could streamline operations and significantly reduce costs for FPIs, particularly given the current trend of increasing overseas outflows.

Under the existing framework, FPIs are required to settle each buy and sell order individually, even for trades involving the same stock within the same day. This requirement necessitates full funding for each purchase and the delivery of shares for each sale, leading to elevated transaction costs and funding demands. Transitioning to a net-settlement system would alleviate a significant burden for large global investors and potentially enhance India’s attractiveness as a destination for institutional investments.

India has seen a notable increase in FPI outflows, with foreign investors withdrawing over ₹ 1.4 trillion from the markets since the beginning of the year. In contrast, there was a net inflow of just ₹ 4.27 billion in 2024, according to data from the National Securities Depository Ltd.

Comprehensive Reforms for Foreign Investors

This proposed change is part of broader reforms aimed at fostering a more conducive environment for foreign investors. Pandey noted that Sebi is advancing towards complete digitization of the FPI registration process. By utilizing digital signatures, this change is expected to make onboarding paperless, significantly reducing approval timelines from months to mere days.

To further enhance service quality, a second registration platform is being established by the Central Depository Services Ltd, moving away from the current single-platform structure. Additionally, Sebi may introduce the Single Window Automatic & Generalized Access for Trusted Foreign Investors (SWAGAT-FI) initiative. This would allow foreign investors, under the new FPI framework, to invest in India through various routes prescribed by the Foreign Exchange Management Act (FEMA) without the need for additional compliance measures. A significant aspect of SWAGAT is that it would enable investors to utilize a single demat account for all securities, regardless of whether they were acquired as an FPI or as a foreign venture capital investor.

Pandey emphasized that Sebi is actively collaborating with the Reserve Bank of India (RBI) and the Ministry of Finance to implement these initiatives. Despite the increasing participation from domestic investors, he reaffirmed that FPIs remain crucial to India’s capital markets. As of September 2025, FPIs held assets worth $876 billion with custodians, representing approximately 17% of all listed Indian companies.

Addressing FPI Concerns

In recent years, Sebi has introduced several measures aimed at addressing the concerns of FPIs. These include a revamped registration module designed for efficiency, a light-touch regulatory framework for FPIs primarily investing in government securities, an expanded anchor investor framework for initial public offerings, and a comprehensive overhaul of the block-window framework to enhance liquidity for large institutional trades.

As the next phase of reforms unfolds, Pandey expressed a commitment to creating a “best-in-class” experience for offshore investors while domestic inflows continue to gain momentum as a significant force in the market.