Sebi approves easier norms for FPIs investing only in Government Bonds

New Delhi , 18 June , 2025- Capital market regulator Sebi has approved a set of relaxations for Foreign Portfolio Investors (FPIs) that invest exclusively in Government Securities (G-Secs), designated as GS-FPIs, a statement said on June 18.

The move comes in light of India’s entry into global bond indices and is aimed at easing operational compliance and boosting foreign investment into Indian sovereign debt.

Among the major relaxations, Sebi will harmonize the periodicity of KYC reviews for GS-FPIs with that of the Reserve Bank of India, effectively reducing the frequency of mandatory checks. GS-FPIs will also be exempt from furnishing investor group details, which are largely necessary for monitoring equity and corporate bond exposures. Furthermore, non-resident Indians, Overseas Citizens of India, and resident Indians will now be allowed to be constituents of GS-FPIs, without the restrictions typically applied to other FPIs. Existing safeguards for resident Indian participation—such as limits on exposure via the Liberalised Remittance Scheme—will continue to apply.

In another procedural ease, GS-FPIs will now have up to 30 days, instead of the earlier 7, to intimate Sebi about material changes in their setup. Additionally, onboarding and classification of FPIs as GS-FPIs—whether existing or prospective—will be governed by conditions specified by Sebi from time to time.

These relaxations were finalized following a stakeholder consultation process, which included feedback on a discussion paper issued on May 13, and recommendations from Sebi’s FPI Advisory Committee. The regulatory adjustments are expected to smoothen India’s integration into global bond indices and facilitate the anticipated inflows into the G-Sec market.

Several global index providers last year included Indian G-Secs in their respective indices. JPMorgan included Indian government bonds in its Global Emerging Market Bond Index starting June 2024, Bloomberg’s EM Local Currency Government Index followed in January 2025, while FTSE Russell’s Emerging Markets Government Bond Index is set to include Indian G-Secs from September 2025. These developments have triggered substantial passive inflows into India’s bond markets as global funds adjust their portfolios to mirror the index constituents.

Sebi noted that FPI investments in securities eligible under the Fully Accessible Route (FAR) have already seen a significant increase, crossing Rs 3 lakh crore as of March 2025. To support and further encourage such investments, Sebi has decided to rationalize compliance requirements that were originally framed with equity and corporate bond investors in mind, and are not entirely relevant for investors dealing exclusively in sovereign debt.