SEBI Raises FPI Disclosure Threshold: A Move Toward Balanced Regulation

Introduction

The Securities and Exchange Board of India (SEBI) has recently released a circular amending a previous circular for mandating additional disclosures by FPIs that fulfil certain objective criteria.[1] This amendment specifically addresses the size threshold which determines when FPIs must make enhanced disclosures about their ownership and control structures.

Key Changes Introduced by the Circular

Previously, FPIs that individually, or along with their investor group (as defined under Regulation 22(3) of SEBI’s FPI Regulations), held more than ₹25,000 crore of equity assets under management (AUM) in Indian markets were mandated to provide additional disclosures. This size-based trigger has now been significantly revised.

Effective immediately, SEBI has doubled this threshold from ₹25,000 crore to ₹50,000 crore of equity AUM.

This modification is not only for direct FPIs but also for Offshore Derivative Instruments (ODIs) subscribers, who also faced the same disclosure requirements through a different SEBI circular issued on December 17, 2024.

Specific Changes to the FPI Master Circular

The following specific paragraphs in the FPI Master Circular have been modified to capture the new ₹50,000 crore limit:

• Sub-para (xiii)(b) of Para 1 of Part C
• Sub-para (xv) of Para 1 of Part C
• Sub-para (xx)(b) of Para 1 of Part C
• Sub-para (i)(b) of Para 4 of Part D
• Sub-para (iv) of Para 4 of Part D
• Sub-para (ix)(b) of Para 4 of Part D

The amendment will ensure consistency throughout all connected disclosure requirements for FPIs and ODI subscribers.

Objective and Rationale Behind the Amendment

SEBI’s move to raise the threshold is likely motivated by a combination of regulatory calibration and practical considerations. As India’s markets have grown significantly in size and depth over the past few years, many large FPIs have naturally crossed the ₹25,000 crore mark.

By increasing the threshold to ₹50,000 crore, SEBI is looking to direct regulatory oversight to only genuine big players while ensuring disclosure requirements are proportionate and specific. This change can also spur foreign investment to continue without creating disproportionate compliance burdens for mid-sized institutional investors.

Further, SEBI points out that this amendment is made in exercise of the powers vested in it under Section 11(1) of the SEBI Act, 1992, and the connected provisions of the SEBI (FPI) Regulations, 2019 (namely Regulations 22(1), 22(6), 22(7), and 44). The intention, as ever, is the protection of investors and the regulation and orderly growth of the securities market in India.

Implications of the Circular on Stakeholders

This amendment carries significant implications for various stakeholders across the Indian securities market.

Foreign Portfolio Investors (FPIs)

To FPIs, especially large institutional investors and sovereign funds, the circular offers significant regulatory relief. Under the previous ₹25,000 crore cut-off, many mid-to-large FPIs needed to make voluminous disclosures regarding their ownership patterns, ultimate beneficial owners, and control structures. The disclosures were often time-consuming, paperwork intensive, and coordination-intensive across multiple jurisdictions, especially in the case of funds having layered or complex ownership.

With the hike to ₹50,000 crore, most FPIs, which were otherwise ensnared in the disclosure web, will now be out of it. This action relieves them of their compliance burden, minimizes the administrative expenses linked to periodic filings, and maximizes their operating efficiency. Smaller FPIs at the threshold of growing portfolios also get a clearer runway for investment growth with no immediate disclosure scrutiny.

Concurrently, FPIs with very large holdings — over ₹50,000 crore — will need to continue with high degrees of transparency. For them, the regulatory load does not change, and in a few instances, it will expand in the long term if SEBI intensifies its supervision of systemic investors with significant stakes in Indian markets.

Offshore Derivative Instruments (ODI) subscribers

ODI subscribers who indirectly invest through instruments issued by FPIs are also affected. ODI subscribers, who in the past had to make detailed disclosures at the ₹25,000 crore level, now enjoy the increased threshold.

This should prompt institutional investors to participate more in ODIs who may otherwise have been concerned about onerous disclosure requirements. But it is also an unmistakable indicator that SEBI is keeping a hawk eye and only wants disclosure from the largest players whose positions can have a material influence over Indian equity markets.

Designated Depository Participants (DDPs) and Custodians

DDPs and custodians, being key players in onboarding FPIs and facilitating compliance with disclosure and reporting obligations, will experience operational changes due to this amendment.

To begin with, the quantum of verification, documentation, and disclosure-related services required by FPIs will be less. DDPs will have to modify their internal compliance checklists, onboarding procedures, and client advisories in line with the new ₹50,000 crore threshold.

In operational terms, this decreases their workload for mid-sized FPIs but heightens the value of careful monitoring and advisory services for their biggest clients. Custodians will also need to re-tune their monitoring systems to monitor clients nearing the new disclosure threshold and provide proactive compliance assistance.

Listed Companies

Indian listed companies are indirect beneficiaries of this regulatory rebalancing. Ease of compliance for FPIs may stimulate more FPI flows into Indian equities, leading to increased liquidity and valuation metrics for listed companies.

Additionally, as listed companies are mandated to coordinate with depositories and regulators in some instances of significant FPI holdings (e.g., sectoral cap breaches or reporting of material beneficial ownership), the decline in disclosure-triggered events can simplify their regulatory coordination load.

But listed companies with high FPI holdings should be watchful of any shifts in their shareholder base, particularly when it comes to FPIs approaching or reaching the ₹50,000 crore mark.

Stock Exchanges, Clearing Corporations, and Depositories

For market infrastructure entities such as stock exchanges, clearing corporations, and depositories, the amendment reduces backend monitoring to a certain extent. Surveillance and reporting systems will have to be modified to take into account the new ₹50,000 crore threshold while monitoring and flagging large FPI investments.

However, depositories and exchanges should see that systems remain designed to continue reflecting correct information for high-volume FPIs in order to support timely warnings to SEBI should there be concerns of concentration or regulatory violations.

Conclusion

SEBI’s revised threshold reflects a strategic calibration between regulatory oversight and market facilitation. By narrowing disclosure obligations to truly systemic players, SEBI enhances investor confidence without stifling mid-sized foreign investments. This move signals a maturing regulatory approach — one that acknowledges India’s expanding market depth while ensuring that transparency, market integrity, and growth go hand in hand.

[1] https://www.sebi.gov.in/legal/circulars/apr-2025/amendment-to-circular-for-mandating-additional-disclosures-by-fpis-that-fulfil-certain-objective-criteria_93399.html.  

King Stubb & Kasiva,
Advocates & Attorneys

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