The Securities and Exchange Board of India (SEBI) is considering proposals to provide relief to foreign portfolio investors (FPIs), including permitting netting of funds for same-day transactions in the cash market. The proposal is expected to be reviewed at the SEBI board meeting scheduled for March 23, according to sources.
The proposed change would allow FPIs to offset buy and sell transactions executed on the same day in the cash market. This is expected to reduce liquidity pressures and lower the cost of capital for FPIs, particularly during high-volume trading sessions such as index rebalancing.
Under the current framework, FPIs are required to maintain separate funds and securities for purchase and sale transactions. All transactions are aggregated at the custodian level, and FPIs are required to meet obligations on a gross basis. Subsequently, custodians settle transactions with clearing corporations on a net basis. This process requires FPIs to block capital for at least one day and incur additional costs due to foreign exchange differences and reliance on short-term credit facilities.
If approved, the netting facility would enable FPIs to use proceeds from same-day sales to fund purchases in the cash market. However, netting would not be permitted for transactions involving the same security within the same day or settlement cycle. The proposed framework is expected to simplify fund management and reduce the need for additional interest or financing costs.
FPIs had sought regulatory relief for such a facility last year. In January 2026, SEBI issued a consultation paper on the proposal. Market participants have indicated that the move could increase FPI activity and investment in the market.
Sources also indicated that SEBI may consider additional relaxations for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs). These include permitting investments in liquid fund schemes and allowing investments in schemes with a credit risk value of 10 or higher, compared with the current threshold of 12, which limits investment opportunities.
SEBI is also evaluating aligning investment conditions for private InvITs with those applicable to public InvITs for new projects. This would standardize rules for both new and existing investors and is expected to improve transparency and ease of investment.
In addition, the SEBI board may review measures to simplify compliance with ‘fit and proper person’ criteria for market intermediaries such as stock brokers. Currently, brokers are required to comply with multiple regulatory requirements, which can pose challenges for smaller and new entrants. Any easing of these processes could facilitate licensing and operations for new brokers.
The proposed measures are expected to improve fund management flexibility for FPIs, reduce financing and foreign exchange-related costs, and enable greater participation during high-volume trading sessions. Relaxations for REITs and InvITs may expand investment opportunities through broader portfolio diversification.
If approved, the proposals could lead to increased participation by FPIs and other foreign investors in the Indian equity market, potentially resulting in higher capital flows and increased activity in benchmark indices, including the Nifty-50.
