Brief Overview:

Any foreign individual can now participate in the Indian capital markets. Previously only NRIs (non-resident Indians) and OCIs (overseas citizens of India) were so permitted. The Foreign Exchange Management (Non-debt Instruments) Rules, 2019 have been amended to extend such routes to all PROI (persons resident outside India) to attract further foreign capital into India.

Technical Details:

1)    A PROI may purchase / sell listed Indian equities, units of an Indian Mutual Fund, etc., on a repatriation basis.

2)   Key access condition is that all such transactions to be routed through an Authorised Dealer.

3)   Individual and Aggregate Investment Limits for PROI: 10% for an individual PROI and 24% for all individual PROI in the aggregate.

4)   Breach of these limits require the concerned PROI to divest within 5 trading days. Failure to so rectify shall result in the investment being categorised as a ‘FDI’ (foreign direct investment).

5)   Given the manner of amendment, it appears that transfer directly by an NRI / PIO to a PROI not being an NRI / PIO may be now permissible.

6)  Restrictions under FDI Route as regards transfer of ownership / change of control of investee company, or UBOs from countries bordering India, etc., equally apply to investments by PROI.

7)   Aggregate investments by a FPI (foreign portfolio investor) ‘investor group’ under all routes is capped at 24%. This includes stakes held under FDI Route. Breach of this limit attracts consequences same as those applicable to PROI (see paragraph 4) above).

Takeaways:

India has finally opened its secondary markets to all foreigners. In that process, no discrimination against NRIs and PIOs while continuing to keep certain routes open only for NRIs and PIOs.

In the context of amendments made as regards FPI, it’s hoped that this clears the air on the ability of a foreign body corporate being able to hold investments in India under both FDI and FPI route. Also, for that matter, ability of a FDI investor to participate also as a FPI in IPOs.

For further details, please see:

Foreign Exchange Management (Non-debt Instruments) (Third Amendment) Rules, 2026.pdf

For any queries or clarifications, please feel free to reach out to us:

• Mr. Jayesh H (jayesh.h@juriscorp.in)
• Mr. Pranav Rattan (pranav.rattan@juriscorp.in