In a significant move aimed at enhancing market transparency while fostering investment growth, the Securities and Exchange Board of India (SEBI) has doubled the disclosure threshold for foreign portfolio investors (FPIs) from ₹25,000 crore to ₹50,000 crore. This decision, made on March 24, 2025, under the leadership of newly appointed Chairman Tuhin Kanta Pandey, reflects SEBI’s efforts to adapt to the rapidly evolving Indian securities market. Here’s a detailed analysis of this regulatory shift and its implications for both investors and the market.
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The decision to increase the disclosure threshold comes on the heels of a substantial rise in cash equity market trading volumes, which have more than doubled between FY22-23 and FY24-25. This growth underscores the increasing importance of FPIs in Indian markets and the need for regulatory adjustments to ensure compliance with anti-money laundering laws (PMLA) and other financial regulations.
The Disclosure Threshold: What It Means
Prior to this change, FPIs with equity assets under management (AUM) exceeding ₹25,000 crore were required to provide granular details of their investors or stakeholders on a look-through basis. This included disclosing all entities holding any ownership, economic interest, or control up to the level of natural persons. The new threshold of ₹50,000 crore aims to strike a balance between transparency and the operational burden on FPIs, ensuring that only the largest players are subject to these detailed disclosures.
Exemptions and Concentration Criteria
Notably, sovereign and public funds are exempt from these additional disclosures, as they already comply with PMLA and Know Your Customer (KYC) norms. Furthermore, SEBI has maintained the requirement for additional disclosures if more than 50% of an FPI’s equity AUM is concentrated in a single corporate group. This ensures that large, concentrated investments remain under scrutiny to prevent potential circumvention of regulatory norms.
Conflict of Interest Review Committee
In addition to the disclosure threshold change, SEBI has announced plans to establish a high-level committee to review conflict of interest provisions for its board members. This move follows recent controversies and aims to enhance transparency and governance within the regulatory body.
Implications for Investors and the Market
The increased threshold could lead to increased participation from FPIs, as it reduces the compliance burden for smaller players. However, critics argue that higher thresholds might reduce transparency, potentially allowing for more opaque investment structures. On the other hand, proponents see this as a necessary step to attract more foreign capital, boosting market liquidity and economic growth.
Challenges and Opportunities Ahead
As the Indian market continues to grow, balancing regulatory oversight with investment incentives will be crucial. SEBI’s decision reflects this challenge, aiming to ensure that while transparency is maintained, the operational costs for FPIs do not become prohibitive. The establishment of a conflict of interest review committee further underscores SEBI’s commitment to ethical governance.
SEBI’s decision to increase the FPI disclosure threshold to ₹50,000 crore marks a significant shift in regulatory strategy, reflecting both the growth of the Indian market and the need for balanced oversight. As the market evolves, it will be important to monitor the impact of these changes on transparency, investment flows, and overall market health.
FAQ
What is the new disclosure threshold for FPIs in India?
The new threshold is ₹50,000 crore, doubled from the previous ₹25,000 crore.
Why was the disclosure threshold increased?
The increase reflects the doubling of cash equity market trading volumes between FY22-23 and FY24-25, aiming to balance transparency with operational efficiency.
Are sovereign and public funds exempt from additional disclosures?
Yes, they are exempt as they already comply with PMLA and KYC norms.
What happens if an FPI’s equity AUM is concentrated in a single corporate group?
If more than 50% of the equity AUM is concentrated in a single group, additional disclosures are required.
What is the purpose of SEBI’s conflict of interest review committee?
The committee aims to enhance transparency and governance by reviewing conflict of interest provisions for board members.
How might the increased threshold affect FPI investment in India?
It could attract more foreign capital by reducing compliance burdens for smaller FPIs.
What are the potential risks of increasing the disclosure threshold?
Critics argue it might reduce transparency, allowing for more opaque investment structures.
When will the conflict of interest review committee submit its recommendations?
The committee is expected to submit its recommendations within three months of its formation.
