The Securities and Exchange Board of India (Sebi) has notified significant changes to Foreign Portfolio Investors (FPI) Regulations, shifting from a US dollar-denominated fee structure to a rupee-denominated payment system. According to the notification dated 3 July, the regulator will substitute the words and symbols 'US $1,000' with '₹90,000 in eligible foreign exchange equivalent' in regulation 43B(2). The changes will come into effect after six months, providing foreign entities sufficient time to transition to the new payment structure. As per Sebi, shifting to INR-based payments will simplify fee collection, improve accounting efficiency, and reduce operational complexities associated with foreign currency transactions. The move is intended to modernize administrative processes and improve financial reporting for both regulators and market participants.
Sebi has implemented comprehensive fee revisions across multiple categories with specific changes to FPI registration fees. The registration charges for Category-I FPIs have been increased from $2,500 to ₹2.3 lakh, while Category-II FPI fees have been revised from $250 to ₹23,000. Additionally, the regulator has revised the application fee for seeking general relaxations or exemptions from strict enforcement of regulations from USD 1,000 to ₹90,000 in eligible foreign exchange equivalent. Designated depository participants handling FPI trades in India must now remit fees to Sebi within five working days of registration grant. The market regulator collected a total of $12.98 million in FY 2025-26 from FPI and FVCI fees for registration, continuation, and other charges, including GST. Under the revised regulations, FPIs and FVCIs will now pay registration, renewal, and continuation fees in Indian rupees rather than U.S. dollars, replacing dollar-denominated fees with fixed INR amounts to make fee calculations more transparent and reduce uncertainty arising from exchange rate fluctuations.
To enhance compliance and operational efficiency, Sebi has introduced several simplification measures. The common application form for FPI registration will now include the date of birth or incorporation to facilitate PAN application following the Central Board of Direct Taxes (CBDT) notification in March. The fee structure for custodians has been revised from annual payments of ₹10 lakh to monthly payments of ₹85,000. These changes aim to eliminate manual accounting and invoicing issues that previously caused significant time delays and lacked real-time accounting visibility. Receiving fees in foreign currency required manual invoicing, exchange rate calculations, and reconciliation, making the process time-consuming and limiting real-time visibility into fee collections. By adopting INR-denominated payments, Sebi expects to improve accounting and reconciliation, reduce administrative delays, minimize the impact of currency fluctuations, and enhance operational efficiency for both regulators and market participants.
Sebi has also notified changes to Mutual Fund Regulations regarding intraday borrowing facilities. Mutual funds will now be able to avail intraday borrowing to bridge differences arising from pay-in and pay-out settlement timings within asset classes, forex settlements, and other transactions. This facility is in addition to the current borrowing permitted up to 20 per cent of net assets for meeting unit-holder payouts such as redemptions. Asset management companies will be responsible for repaying borrowings by the end of the day and complying with mutual fund regulations for conversion to overnight borrowing. The revised regulations will not take effect immediately, with Sebi providing a six-month implementation window allowing FPIs, FVCIs, custodians, and Designated Depository Participants sufficient time to update their systems, operational processes, and payment mechanisms before the new rules become mandatory.
The new rupee-denominated fee structure comes as foreign portfolio investors demonstrate strong confidence in Indian markets. According to latest data, Foreign portfolio investors (FPIs) made a record net investment of ₹41,773 crore in Indian government securities under the Reserve Bank of India's (RBI) Fully Accessible Route (FAR) in June. This substantial investment flow underscores the continued attractiveness of Indian government securities to international investors. The timing of these regulatory changes aligns with robust foreign investment activity, suggesting that the new fee structure will not deter continued foreign participation in Indian markets.
