Sebi Unveils New Easing Measures for FPIs in Government Bond Investments: Enhancing VRR and FAR Regulations

In a significant move aimed at enhancing foreign investments in Indian government bonds, the Securities and Exchange Board of India (Sebi) announced new proposals for foreign portfolio investors (FPIs) on Tuesday. These changes focus on easing regulatory requirements, particularly for those investing exclusively through the Voluntary Retention Route (VRR) and the Fully Accessible Route (FAR). This initiative is expected to attract more foreign capital into the Indian bond market.

Key Changes Proposed for FPIs

According to Sebi’s recent report, FPIs collectively held approximately ₹3 trillion in government bonds eligible under the FAR as of March 2025. To streamline operations and promote investment, Sebi has suggested several adjustments:

KYC Review Alignment: The periodicity for Know Your Customer (KYC) reviews for FPIs investing in government bonds will be synchronized with the timelines set by the Reserve Bank of India (RBI). This move aims to simplify compliance and enhance the ease of doing business.
Investor Group Disclosure: FPIs will no longer be required to disclose details about their investor groups. This simplification is expected to lower barriers for foreign investors looking to enter the Indian market.
Relaxed Reporting Timeline: The proposed timeline for notifying material information will be extended to 30 days, providing FPIs with more flexibility in their reporting obligations.

Expanding Investment Opportunities

In an effort to broaden the participation base, Sebi is also considering allowing both resident and non-resident Indians, as well as overseas citizens, to contribute to the investment pool of FPIs focused on government bonds. This initiative could significantly enhance the capital flow into the Indian economy.

Conclusion

These proposed changes by Sebi come as part of a broader strategy to foster a more inviting investment climate for foreign portfolio investors. By easing regulatory burdens and expanding participation options, the Indian government aims to reinforce its position as a lucrative destination for global investors in government bonds. The potential influx of foreign capital could further stabilize and enhance the growth trajectory of the Indian economy in the coming years.

For more insights into market movements and financial strategies, explore our resources on investing in Indian bonds and the impact of foreign investments.