Govt Eases Foreign Investment Norms, Expands Access To Equities And G-Secs

New Delhi, Jun 5 (KNN) The Ministry of Finance has announced a series of measures to simplify foreign investment procedures and attract long-term overseas capital into Indian equity and government securities markets.

The reforms are aimed at enhancing ease of investment for individual Persons Resident Outside India (PROIs) and Foreign Portfolio Investors (FPIs), while strengthening India's position as a global investment destination.

PROIs Allowed To Invest In Listed Equities Through PIS 
As announced in the Union Budget 2026-27, individual PROIs will now be permitted to invest in equity instruments of listed Indian companies through the Portfolio Investment Scheme (PIS), a facility that was previously available only to Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs).

To implement this proposal, the Department of Economic Affairs will notify the Foreign Exchange Management (Non-Debt Instruments) (Third Amendment) Rules, 2026.

Under the revised framework, the investment limit for an individual PROI under the scheme has been increased from 5 percent to 10 percent in a company, while the aggregate investment limit for all individual PROIs has been raised from 10 percent to 24 percent.

The government said the move will leverage existing onboarding mechanisms, reduce compliance requirements and help attract a wider pool of stable foreign portfolio investors into Indian equity markets.

Government Expands Access To Government Securities 
In a separate measure, the government has liberalised the regulatory framework governing FPI investments in Government Securities (G-Secs).

The list of securities eligible under the Fully Accessible Route (FAR) will be expanded to include new issuances of 15-year, 30-year and 40-year government bonds, along with Sovereign Green Bonds issued in FAR-eligible tenors.

The government has also decided to remove restrictions relating to short-term investment limits, concentration limits and security-wise investment caps for FPIs investing in government securities through the General Route.

However, the overall investment ceiling of 6 percent of outstanding Central Government securities and 2 percent of State Government Securities (SGSs) will remain unchanged.

FPI Investment Categories To Be Simplified 
Additionally, the existing 'general' and 'long-term' sub-categories for FPI investment limits in government securities and SGSs will be merged into a single category.

The government said these measures are expected to support the development of a smoother sovereign yield curve and encourage greater participation from long-term institutional investors such as pension funds, insurance companies and sovereign wealth funds.

Tax Exemptions Introduced To Boost Debt Market Appeal 
To further improve the attractiveness of Indian debt markets, the government has announced a complete income tax exemption on interest income and capital gains earned by FPIs from investments in Government Securities.

The exemption will take effect from April 1, 2026, and will apply to all eligible interest income and capital gains arising thereafter. A similar tax exemption has also been extended to the Bank for International Settlements (BIS) for its investments in Government Securities.

According to the Finance Ministry, the reforms are intended to simplify market access, reduce operational complexities and align India's investment framework with global standards, thereby attracting stable long-term foreign capital and broadening participation in Indian financial markets.

(KNN Bureau)