Sebi Announces Major Reduction in FPI Registration Timeline
India's capital market regulator is set to dramatically accelerate the registration process for foreign portfolio investors, cutting the current 30-day timeline down to just five days. Securities and Exchange Board of India chairman Tuhin Kanta Pandey revealed this significant reform initiative, emphasizing that the move aims to make India more attractive to global investors.
Addressing Perception vs Reality in Registration Delays
"The idea is that we should take five days. Currently, we are talking about 30 days. But people's impression is that it takes a few months," Pandey stated in an exclusive interview. This perception gap has been a persistent challenge for Sebi, with many foreign investors viewing India's regulatory processes as cumbersome compared to other emerging markets.
To bridge this gap and facilitate smoother onboarding, Sebi has been conducting educational webinars for foreign investors. Approximately 2,000 FPIs have participated in these sessions conducted by Sebi officers, gaining insights into navigating the Indian market landscape more effectively.
Context of Foreign Investment Outflows
The regulatory push comes against a backdrop of significant foreign investment outflows from Indian equities. According to National Securities Depository Ltd data, FPIs recorded a net outflow of ₹1.66 trillion from Indian equities in 2025, a stark reversal from the ₹427 crore inflows seen in the previous year.
This trend has continued into 2026, with foreign investors pulling out a net ₹35,962 crore from Indian equities so far. High valuations and prolonged earnings slowdown have prompted many foreign investors to redirect funds toward AI-focused markets like Taiwan and South Korea.
Foreign portfolio investors have been utilizing every market rebound to build short positions, reflecting ongoing concerns about corporate earnings performance. This cautious approach has contributed to India's relatively weaker market performance even as global markets navigate US-Europe trade tensions.
International Engagement and Investor Confidence
Recent interactions with Japanese investors revealed strong confidence in India's economic prospects, according to Pandey. "They were happy that some of the Japanese subsidiaries which are listed here are doing so well," he noted, highlighting the positive sentiment among investors from countries with established economic ties to India.
Many Japanese entities expressed interest in expanding beyond foreign direct investment to increase their portfolio exposure to Indian markets. Some smaller Japanese companies indicated ambitions not just to invest in India but eventually to list their operations there, potentially establishing research and development facilities that could become publicly traded entities.
Digital Transformation Driving Efficiency
The accelerated registration timeline is closely linked to Sebi's broader digitization efforts. The regulator plans to implement comprehensive digital processes, including digital signatures, to streamline approvals. Once fully digitized, Sebi intends to track and calculate processing timelines with greater transparency and accountability.
In 2025, Sebi launched SWAGAT-FI, a digital platform serving as a single-window interface for FPI registration, documentation, and grievance redressal. This initiative aims to improve coordination between FPIs, intermediaries, and the regulator while reducing delays and enhancing transparency throughout the registration and post-registration processes.
Persistent Challenges in the Investment Landscape
Despite these regulatory improvements, FPIs continue to face certain hurdles in Indian markets. Capital gains taxation remains a particular concern, with Pandey acknowledging that "most jurisdictions do not have capital gains for foreigners." However, he clarified that this falls outside Sebi's regulatory purview.
India's capital gains tax structure distinguishes between short-term investments (taxed at 20% for gains booked before 12 months) and long-term investments (taxed at 12.5% for gains booked after 12 months). This taxation framework, while consistent with India's fiscal policy, represents a competitive consideration for foreign investors comparing jurisdictions.
The combination of streamlined registration processes, enhanced digital infrastructure, and proactive investor engagement represents Sebi's multi-pronged strategy to revitalize foreign investment flows into Indian capital markets. As global investment patterns evolve, these regulatory reforms aim to position India as a more accessible and attractive destination for international portfolio capital.
