The Securities and Exchange Board of India (Sebi) has eased compliance requirements for foreign portfolio investors (FPIs) that invest exclusively in Indian government securities, according to a circular issued on September 7, 2026. The move extends a relaxation Sebi had first carved out in September 2025 for FPIs investing only in government bonds under the Fully Accessible Route (FAR). The latest amendment follows the RBI's June 5, 2026 circular, which withdrew the requirement for FPIs investing in government securities through the General Route to comply with the prescribed concentration limit. Sebi stated that the requirement to identify the investor group of an FPI investing only in government securities was no longer relevant following the RBI's decision, with the regulator noting that the move primarily aims to reduce compliance requirements for foreign investors that invest exclusively in government securities.
The Sebi circular amends the Master Circular for FPIs, Designated Depository Participants (DDPs) and Eligible Foreign Investors, dated May 30, 2024. The revised provision now reads: 'FPIs investing only in Government Securities shall not be required to furnish investor group details', widening the earlier exemption that was restricted to the Fully Accessible Route alone to cover all FPIs investing purely in government debt, irrespective of the route. This means the relaxation is no longer restricted to FPIs investing through FAR; it applies more broadly to FPIs investing only in government securities, regardless of the investment route they use. The change is particularly significant as it removes the previous limitation that only FPIs using the Fully Accessible Route were eligible for this exemption. The circular takes effect immediately from September 7, 2026, with no compliance deadline, transition window or grandfathering clause prescribed.
The circular will take effect immediately, according to Sebi's announcement. As reported by the regulator, 'Depositories, custodians and DDPs are advised to make necessary changes in their systems to effect the changes proposed above'. For custodians and DDPs, this represents a reclassification exercise rather than a new obligation: identify existing General Route FPI clients that invest solely in Government Securities, and stop requesting investor group details from that group going forward. The changes extend the relief previously provided through a September 10, 2025 circular that offered similar exemptions to FPIs investing exclusively in government securities under the Fully Accessible Route, making the latest amendment more comprehensive in scope. In simple terms, an overseas investor that comes to India solely to buy government bonds will no longer have to provide additional information about its broader investor group merely to meet a concentration-limit monitoring requirement that no longer applies to such investments.
The exemption applies specifically to FPIs that hold only government securities and covers both the Fully Accessible Route and General Route investors. FPIs with mixed portfolios holding government securities alongside equities, corporate bonds or other instruments remain subject to the investor group requirement. The circular confirms that 'FPIs investing only in Government Securities shall not be required to furnish investor group details' regardless of their investment route. However, the exemption does not extend to FPIs holding government securities alongside other instruments, as adding other instruments would bring the investor-group requirement back into play. The circular does not specify whether the investor group requirement would reattach automatically if an FPI currently qualifying for the exemption later adds other instruments to its portfolio, leaving this as an open question for compliance teams to monitor.
