India’s capital market regulator floated two proposals over the weekend for easing business and capital flows for foreign portfolio investors (FPI).
The Securities and Exchange Board of India proposed the ‘Single Window Automatic and Generalised Access for Trusted Foreign Investors’ (SWAGAT-FI) for low-risk foreign investors, sovereign pools, and regulated public retail funds.
Its other proposal aims to widen the participation of resident Indians in FPIs. This would be by allowing retail schemes at the International Financial Services Centre (IFSC) with resident Indian sponsors or managers to register as FPIs.
A single window for “trusted” foreign investors
Sebi proposed SWAGAT-FI as a streamlined gateway for objectively low-risk foreign investors to access India’s markets with lighter onboarding and compliance requirements, while retaining supervisory safeguards.
The framework’s aims are threefold: easier investment access, unified registration across routes (FPI and foreign venture capital investor, or FVCI), and reduced repetition in compliance and documentation.
Sebi noted in its paper that as of 30 June, India had 11,913 registered FPIs with ₹80.83 trillion in assets under custody. The regulator estimated that investors eligible for SWAGAT already account for over 70% of total FPI assets under custody (AUC).
Sebi has proposed to identify the following as SWAGAT FI—government and related investors (including central banks), and regulated public retail funds such as mutual funds and insurance companies.
The low-risk characterisation rests on transparent ownership, diversified investor bases, and long-term orientation that reduces concerns around minimum public shareholding in listed companies and takeover regulations.
Key relaxations, according to Sebi, include optional dual registration (FPI+FVCI) without additional documentation, enabling the same institution to invest in listed and unlisted companies, including startups.
The relaxations also include extending the registration or know-your-customer (KYC) review period for such investors to 10 years from 3-5 years. The proposal also aims to permit greater participation of resident and non-resident Indians and persons with overseas citizenship of India in public retail funds by removing the 50% aggregate cap for SWAGAT-FI mutual funds.
Facilitating resident Indian participation in FPIs
Sebi separately proposed three measures to facilitate and clarify how resident Indian entities can participate in the FPI ecosystem, particularly via Gujarat International Finance Tec-City and International Financial Services Centre (GIFT-IFSC) structures.
1. Retail schemes in IFSC with resident Indian non-individuals as sponsors or managers would be allowed to register as FPIs, extending a permission already available to alternative investment funds (AIFs) at IFSC with resident Indian sponsors or managers.
IFSC ‘retail schemes’ must have at least 20 investors, a 25% cap per investor, a 10% single-issuer limit, and a “skin-in-the-game” requirement of 1% of assets under management (AUM) or $200,000 by the associate.
2. Sebi proposed aligning contribution limits for resident Indian non-individuals with the International Financial Services Centres Authority’s framework by setting a uniform 10% cap of corpus or AUM for retail schemes.
3. To allow Indian mutual funds to invest in overseas mutual funds or unit trusts that have an exposure to India, Sebi proposed permitting overseas mutual funds to register as FPIS with an Indian mutual fund as a constituent.
AIFs for accredited investors only
Sebi also proposed allowing ‘accredited investors only’ AIF schemes—a distinct class in which every investor (apart from a manager/sponsor/employee carveout) holds accredited status—to receive more flexible regulatory treatment on investor-protection-centric provisions.
An accredited investor is a framework defining income or net-worth criteria across individuals, companies, trusts, and partnerships. Given that accredited investors are presumed capable of assessing complex risk and conducting due diligence, Sebi proposed five main flexibilities for schemes meant only for them:
- Allow differential rights, waiving pari passu or equal terms rights;
- Permit tenure extensions up to 5 years with two-thirds investor approval;
- Waive National Institute of Securities Markets certification for at least one key investment team member;
- Remove the 1,000-investor-per-scheme cap; and
- In trust structures, allow the manager to assume trustee responsibilities per contract and fund documents.
Sebi said the proposals are meant to incentivise managers to launch products specifically for accredited investors while maintaining systemic safeguards such as disclosures, misconduct deterrence, conflict management, and anti-circumvention policies.
All three proposals are open for stakeholder comments until 29 August.
