The Reserve Bank of India has significantly relaxed norms for Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs) to purchase shares in Indian companies. According to reports from Business Standard, the June 2026 announcement introduces three key updates that make overseas investment in Indian equities more accessible and flexible. A qualifying overseas person can now acquire up to 10% of a company's paid-up equity capital, compared with the earlier 5% threshold, without registering as a Foreign Portfolio Investor (FPI). The total holding of all qualifying Person Resident Outside India (PROIs) can now reach 24% of paid-up equity capital, compared with 10% earlier, while the facility now extends to qualifying PROIs beyond just NRIs and OCIs.
The updated framework applies to NRIs, OCIs, and other individual PROIs seeking direct exposure to companies traded on Indian exchanges, subject to prescribed conditions. As reported by Business Standard, NRIs can now take larger direct positions in qualifying exchange-traded companies within the prescribed RBI route, potentially owning a bigger stake in qualifying companies. The higher ceiling may help those with long-term India exposure build larger positions in businesses they understand, while the updated norms could attract more overseas residents to domestic equities and support market depth. The facility also allows for greater portfolio flexibility and broader market participation, particularly supporting HNI wealth strategies where portfolios maintain meaningful domestic equity exposure.
The RBI faces unprecedented liquidity management challenges as FCNR(B) inflows surged by USD 62 billion in the last 10 days alone, between August 21 and 31, according to Bank of Baroda Research. The system surplus has reached Rs 9.71 lakh crore as of September 2, up from Rs 6.7 lakh crore at the end of August, substantially above the RBI's preferred level of around Rs 2.7 lakh crore. Domestic rating agency Careedge noted that these flows "complicate" the central bank's liquidity management, with economists expecting the RBI to deploy additional tools including variable rate reverse repo operations and incremental CRR hikes. The foreign currency assets rose by USD 47.9 billion, taking forex reserves to a record USD 729.3 billion, though these increases cannot be attributed solely to swap operations due to other dollar inflows.
According to Business Standard, the revised thresholds offer NRIs more flexibility in equity exposure, but decisions should still reflect portfolio goals, risk appetite and applicable regulations. Generally, NRIs and OCIs purchasing qualifying shares under the prescribed RBI route do not need FPI registration with SEBI, as the latest change expands simpler access to qualifying PROIs. However, the FPI structure may still apply where holdings exceed permitted thresholds or broader access is required. NRIs should understand banking, regulatory and tax requirements linked to market participation in India, with suitable account structures including NRE PIS, NRO PIS or NRO Non-PIS accounts.
As reported by Business Standard, NRIs should consider foreign ownership caps that may apply to certain companies and sectors, along with taxation implications where dividends and capital gains may attract tax in India and possible obligations in the country of residence. Currency risk from INR exchange-rate movements can affect returns when converted into the investor's home currency, while repatriation norms for transferring sale proceeds outside the country should be understood. The higher permissible thresholds do not remove the risks of concentrated equity exposure, and investors should maintain diversified portfolios across different asset classes and geographies.
