In a move aimed at simplifying regulatory compliance and fostering greater foreign investment in India’s debt market, the Securities and Exchange Board of India (SEBI) has issued a new circular (SEBI/HO/AFD/AFD-PoD-3/P/CIR/2025/127) dated September 10, 2025. The circular introduces substantial relaxations for Foreign Portfolio Investors (FPIs) that invest exclusively in Government Securities — now referred to as GS-FPIs.
This initiative is part of SEBI’s broader vision to attract long-term, stable capital flows into the Indian economy, while reducing administrative burden for low-risk investment categories such as government debt.
What’s Changed?
SEBI has officially amended its comprehensive FPI Master Circular (dated May 30, 2024), which lays down the rules for registration, KYC norms, and investment conditions for FPIs. These amendments aim to streamline processes for GS-FPIs in five key areas:
- No Requirement to Furnish Investor Group Details
Previously, all FPIs were required to disclose detailed information about their investor group affiliations. This requirement will no longer apply to GS-FPIs. Since these entities invest only in sovereign debt under the Fully Accessible Route (FAR), they are now exempt from declaring investor group IDs.
Impact:
Simplifies the onboarding and registration process, encouraging more passive, sovereign debt-focused investors.
- Relaxed Investment Contribution Norms
GS-FPIs are now exempt from certain stringent ownership and contribution requirements. However, a safeguard remains: Resident Indian individuals may only invest via the Liberalized Remittance Scheme (LRS) and in global funds with less than 50% Indian exposure.
Impact:
Balances ease of access for global investors while maintaining checks on potential overexposure by Indian residents.
- Simplified Renewal and Fee Processes
While regular FPIs are required to submit declarations and update any changes in registration information for each renewal cycle, GS-FPIs are only required to pay fees to their Designated Depository Participants (DDPs). They are not required to:
Inform changes in previously submitted information (unless material)
Provide a declaration of “no change”
Impact:
Reduces paperwork, saves time, and cuts compliance costs for government securities-focused investors.
- Material Changes Reporting Timeline
If a GS-FPI undergoes a material change (whether classified as Type I or Type II), the entity must inform SEBI and provide supporting documentation within 30 days.
Impact:
Retains regulatory oversight where necessary while avoiding overburdening investors for routine or minor updates.
- Mechanism for Transition Between Regular FPI and GS-FPI
SEBI has acknowledged the need for flexibility, introducing a new mechanism to seamlessly transition between a regular FPI and a GS-FPI status. Details on this transition process are expected to follow in further communications, but its inclusion in the circular marks a progressive step.
Impact:
Provides flexibility for FPIs to shift their investment focus without facing regulatory roadblocks.
Why This Matters
This circular is a strategic regulatory refinement, aligning with India’s broader objectives to:
- Deepen the bond market by encouraging long-term FPI flows into government securities
- Simplify compliance to attract more international investors
- Enhance investor confidence through a predictable and light-touch regulatory environment for low-risk investment categories.