GS-FPI Framework: SEBI Simplifies Compliance for FPIs Investing in Government Securities

The Securities and Exchange Board of India (SEBI) has amended the SEBI (Foreign Portfolio Investors) Regulations, 2019 (FPI Regulations) vide notification dated August 11, 2025 (Amendment, which can be viewed by clicking on this link), to facilitate ease of regulatory compliance for Foreign Portfolio Investors (FPIs) who invest exclusively in government securities (GS-FPIs). The Amendment will come into force on February 8, 2026.

Further, the Amendment has also been incorporated into the ‘Master Circular for Foreign Portfolio Investors, Designated Depository Participants, and Eligible Foreign Investors’ vide circular dated September 10, 2025 (Master Circular, which can be viewed by clicking on this link).

The key relaxations for GS-FPIs introduced in the Amendment inter alia include:

1. Relaxed Eligibility Criteria

The eligibility criteria under Regulation 4 of the FPI Regulations has been relaxed for GS-FPIs. Notably, GS-FPIs remain subject to the requirement that contributions from resident Indian individuals must be made through the RBI’s Liberalised Remittance Scheme (LRS) and invested in global funds with Indian exposure below 50%.

2. Simplified Renewal Process

While renewing their registration, GS-FPIs are required to pay the fees to their DDPs, but they shall not be required to inform of any change in information or provide a ‘no change’ declaration, as is required for other FPIs.

3. Exemption from Investor Group Details and Harmonized KYC Review

GS-FPIs are exempted from furnishing investor group details, reducing compliance obligations at onboarding and during updates. Further, for GS-FPIs, the periodicity of Know Your Customer (KYC) review by custodians is harmonized with the KYC review periodicity of their respective bank accounts, as prescribed by the RBI.

4. Easy Transition Mechanism

SEBI has introduced the following mechanism to facilitate smooth transitions between regular FPI and GS-FPI:

• • • New FPIs: New FPIs may identify as GS-FPIs by making appropriate declaration to their DDPs at the time of onboarding.

• • • Regular FPIs: Regular FPIs (existing and prospective) may transition to GS-FPIs by making appropriate declarations.

• • • Transition from regular FPIs to GS-FPIs: Upon receipt of a transition request, Designated Depository Participants (DDPs) along with depositories shall ensure that FPI has divested all its holdings, except government securities and that its demat account is either closed or equipped with fail-safe mechanisms to prevent holding of any assets other than government securities. 

• • • Transition from GS-FPIs to regular FPIs: GS-FPIs may transition to regular FPI by making appropriate declarations and incremental information to their DDPs and complying with all regulatory requirements applicable to regular FPIs from the date of such transition.