The Securities Exchange Board of India has proposed easier norms for resident Indians and mutual funds to invest in foreign funds. The regulator proposed to enable retail schemes based in IFSCs in India with resident Indian non-individuals as sponsors or managers to register as FPIs. 

The investment limit is capped at 10 per cent of the targeted corpus, in line with IFSC rules, a release from SEBI said. The suggestion is to replace the sponsor and manager with a fund management entity or associate for IFSC FPIs. SEBI has also proposed allowing Indian mutual funds to invest in overseas funds with India exposure.

These proposals aim to increase investment options for Indian investors to diversify their portfolios. If implemented, these reforms could bridge the gap between India’s domestic savings pool and international opportunities.

Currently, only certain institutional investors meeting SEBI’s criteria can register as FPIs to invest in foreign securities. The proposed changes focus on retail-oriented investment schemes set up in IFS, which would allow a broader range of India-based entities to channel domestic capital into foreign assets through a regulated framework.

At present, non-resident Indians (NRI), overseas citizens of India (OCI) or resident Indians are not eligible to register as FPIs. However, NRIs, OCIs or resident Indian individuals are permitted to be constituents of FPIs, subject to certain conditions in terms of limits on contribution and control of the FPIs.

The Reserve Bank of India’s liberalised remittance scheme permits individuals to remit up to Rs 2.5 lakh annually for overseas investments. Retail investors depend on indirect channels and FoF opportunities in global mutual funds for foreign market exposure.

IFSC is a special economic zone (SEZ) acting as a global financial hub within India, allowing institutions to conduct international financial transactions and operations. The capital market regulator has sought public feedback on its proposals till August 29.