Foreign Portfolio Investors(FPI)

Foreign Portfolio Investors (FPI)

Definition: Foreign Portfolio Investors (FPI) are foreign investors who propose to make portfolio investments in India.
Introduction: The FPI regime was introduced by SEBI through the FPI Regulations, 2014, and later updated with the SEBI (Foreign Portfolio Investors) Regulations, 2019.
Eligibility Criteria: To be eligible for FPI registration, an applicant must:
- Not be a resident Indian
- Not be a non-resident Indian or an overseas citizen of India
- Be a resident of a country whose securities market regulator is a signatory to the International Organization of Securities Commission’s Multilateral Memorandum of Understanding
- Not be a person mentioned in the Sanctions List notified by the United Nations Security Council
- Be a fit and proper person based on the criteria specified in Schedule II of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008
Categories of FPI: There are two categories of FPI:
- Category I FPI: Includes government and government-related investors, pension funds, university funds, and appropriately regulated entities
- Category II FPI: Includes all investors not eligible under Category I, such as corporate bodies, family offices, and individuals
Designated Depository Participant (DDP): A DDP is an entity that provides custodial services to FPIs and is responsible for granting registration certificates to FPIs.
Eligibility Criteria for DDP: To be eligible to act as a DDP, an applicant must:
- Be a registered DDP with SEBI
- Be a custodian of securities registered with SEBI
- Be an Authorised Dealer Category-1 bank authorised by the Reserve Bank of India
- Have multinational presence and systems to comply with Financial Action Task Force Standards
- Be a fit and proper person based on the criteria specified in Schedule II of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008
Engagement of DDP: Each FPI must engage a DDP to avail its services for obtaining a certificate of registration as a foreign portfolio investor, and the DDP and the custodian of the FPI must be the same entity.