According to sources aware of the development, Sebi may consider allowing FPIs to invest in a single stock, as against the existing requirement of holding at least three stocks in India, a condition that has raised concerns among some overseas investors. The regulator is also holding parleys for a possible change in the ownership threshold for stipulating the identification of ultimate beneficiary owners (UBOs).
Sebi had also mandated that FPIs holding more than 50 per cent of their Indian equity assets under management (AUM) in a single corporate group would have to share additional granular disclosure requirements. This, combined with the prescription on number of stocks to be held, posed a greater challenge for managers of foreign funds.
Last April, Sebi had eased the granular disclosure norms by doubling the asset threshold to ₹50,000 crore from an earlier tipping point of ₹25,000 crore. This meant FPIs holding over ₹50,000 crore of equity AUM in Indian markets were required to disclose details of all entities holding ownership, economic interest, or control, on a full-look-through basis.
These plans assume significance against the backdrop of high outflows from overseas investors. FPI selling continued for a third consecutive month in May and intensified further in June, taking cumulative net outflows since March 2026 to $29.2 billion.
Separately, the identification of UBOs under the Prevention of Money Laundering Act (PMLA) Rules also has scope to be reviewed, according to sources. Under the PMLA regime, any natural person holding more than 10 per cent of shares of a company needs to be identified on a look-through basis.
The threshold for this look-through for UBO was reduced from 20 per cent to 10 per cent in 2023. Sources said that globally, this limit remains at 20 per cent — leading to suggestions to align the Indian framework to global standards.
“A global fund which invests in different countries is forced to set up a different fund for India investments as compliance levels are different. Such barriers should be addressed and need a re-look as it may not be tenable,” shared an official.
A regulatory expert explained there are already safeguards like the 10 per cent cap on ownership for such entities. For banking and market infrastructure institutions, the limit is even lower at 5 per cent—beyond which approvals may be required.
While certain relaxations were announced on the granular disclosure front for sovereign wealth funds, government-related funds, and other trusted FPIs, sources indicate that the regulator is undertaking a further review to ease compliance pressures on FPIs.
These discussions are at an early stage, and the proposed relaxations have not yet been placed before Sebi’s FPI Advisory Committee, said a person involved in the deliberations.
“Most of these FPIs are pooled investment vehicles — where investors may change daily. In such instances, they may find it difficult to provide data on ultimate beneficial owners — who are natural persons. Furnishing data till the beneficial owner level is not an issue, but there may be challenges reaching the UBO level,” said another source.
The regulator may consider changing the 50 per cent mandate to global AUM instead of just India AUM. Further, exemptions granted to certain FPIs in Australia and a few states of the US, may also be extended to some more jurisdictions, indicated the person quoted earlier.
Emailed queries to Sebi remained unanswered till press time.
The 2023 amendments to the FPI framework had been triggered by concerns of possible circumvention of regulations, after a report from the now-defunct US-based short seller Hindenburg Research alleged violations in Adani group stocks.
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FPIs may be allowed to invest in a single stock instead of the current three-stock stipulation
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Sebi also holding parleys for a possible change in ownership threshold for identification of ultimate beneficiary owners (UBOs)
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Granular disclosure norms for UBOs, imposed in 2023, also being re-evaluated
 "Securities and Exchange Board of India (Sebi)")