Context: Securities and Exchange Board of India (SEBI) has approved increasing the threshold for disclosures by foreign portfolio investors (FPIs) to ₹50,000 crore from the current ₹25,000 crore.
Relevance of the Topic: Prelims: SEBI Regulations on FPI.
Mandatory Comprehensive disclosures from FPIs (2023):
- SEBI mandated comprehensive disclosures from FPIs holding over ₹25,000 crore in Indian equity assets. This was done to:
- Prevent stock manipulation and mitigate the risk of market disruption from large FPIs.
- Ensure alignment with Press Note 3 stipulations.
Threshold for FPI disclosures raised to ₹50,000 Crore:
- Cash equity markets' trading volumes have more than doubled between FY 2022-23 and the current FY 2024-25. Considering the significant growth in cash equity market volumes, SEBI has revised this threshold.
- FPIs with equity AUM exceeding ₹50,000 crore will be required to disclose full ownership and control details, up to the level of the natural person.
- Aim: To maintain market integrity while reflecting the evolving scale of the Indian markets.
Implications of the Revised Norms
- Ease Compliance burden: The previous ₹25,000 crore threshold led to some FPIs reducing investments to avoid regulatory obligations.
- Encourage Foreign Investments: Reduced compliance burden may attract more mid-sized and small FPIs.
SEBI’s decision balances investment promotion with regulatory oversight. The change enhances India’s market appeal while ensuring transparency in large FPI investments.