Foreign Portfolio Investment (FPI)
  • Any person resident outside India (i.e. individuals, company, firm, association of persons, any agency, office or branch whether incorporated or not, which are resident outside India – hereinafter referred as “Foreign Entity”) can invest or enter into India for doing business under Foreign Portfolio Investment (FPI) route.
  • Foreign Portfolio Investment (FPI) route is allowed (subject to sectoral cap and several other conditions) for investment in
    1. Less than 10% of the post issue paid-up equity capital on a fully diluted basis of a listed Indian company
    2. less than 10% of the paid-up value of each series of capital instruments of a listed Indian company
    3. Total holdings (Aggregate Limit) of all FPIs put together should not exceed 24% of paid-up equity capital on a fully diluted basis or paid up value of each series of debentures or preference shares or warrants. The Aggregate Limit of 24% may be increased by the Indian company concerned up to the sectoral cap / statutory ceiling, as applicable, with the approval of its Board of Directors and its General Body through a resolution and a special resolution, respectively
  • FPI route, generally, is followed by the Foreign Entity for short term investment mostly through stock exchange or for subscribing to the Debt securities of the Indian Companies.
  • FPI is regulated by:
    1. The Foreign Exchange Management Act, 1999 (FEMA), the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2017, directions by RBI to Authorized Persons under Section 11 of FEMA i.e. A.P. (DIR Series) Circulars, Master Direction – Reporting under FEMA (as amended from time to time) – together popularly called as “FEMA 20(R)”
    2. The Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2019 and related SEBI circulars, notifications issued from time to time
  • There is no requirement to create a permanent establishment (PE) in India by the Foreign Entity. However, the Foreign Entity may open a Special Bank Account with the banker authorized by RBI for making banking transactions and a special Demat Account (with specific approval from SEBI) for holding and transacting securities issued in Demat form. For the purpose, the Foreign Entity may appoint a Custodian registered under the Securities and Exchange Board of India (Custodian) Regulations, 1996 to execute the transactions on its behalf in India.
  • The most important point to be assessed is whether the business activities being or proposed to be undertaken by the entity, where the FPI is envisaged, is permitted for the FPI or not and if permitted up to what percentage (this is called as “sectoral cap”).
  • As per SEBI notification dated January 7, 2014 regarding SEBI (Foreign Portfolio Investors) Regulations, 2014, Foreign Portfolio Investors Regime has commenced from June 1, 2014. Pursuant to the implementation of the FPI Regime, SEBI has authorized NSDL to issue registration number and certificate to FPIs on behalf of SEBI along with monitoring of FPI Group investment and various data related to FPI activities to be displayed on NSDL FPI web portal (https://www.fpi.nsdl.co.in/).
  • The Foreign Entity (proposing to invest through FPI route) also need to monitor what is the cumulative investment already done by all non-residents as on a particular date in the proposed investee entity and ensure that they do not breach the prescribed threshold percentage of investment. The threshold limit can be accessed at
    • https://www.fpi.nsdl.co.in/web/Reports/ForeignInvestmentLimitMonitoringListing.aspx
  • Once the investment is done, as per prescribed conditions, the Indian Entity (“IE”), in which FPI is done, required to create Entity Master in Reserve Bank of India (RBI) Foreign Investment Reporting and Management System (FIRMS) website portal (https://firms.rbi.org.in).
  • Every FPI transaction (either as a fresh subscription of shares, subsequent allotment or by way of transfer of shares etc.) requires reporting in the RBI FIRMS portal, through Authorized Dealer / Banker, within the prescribed timeline (30 days for allotment and 60 days for transfer), failing which, the IE may be subject to Late Submission Fees (LSF) and / or Compounding Charges which can be up to 300% of the underlying transaction value.
  • The IE is also required to file Annual Return on Foreign Liabilities and Assets (FLA) by 15th July every year.
How the FPI compliance works with us:
  • Subscribe to the registration type / plan and make payment of the applicable fees.
  • Provide details / data (guided inputs) in the online form required for the FPI Compliance.
  • Provide self-certified scan copy of the specified documents. Followed by courier of all the original documents.
  • A practicing professional (CA/CS/Advocate) reviews the forms, documents and certify the same.
  • We will process the application for the FPI Compliance within 24 hours after receipt of all the required details / documents. We will also respond to any objection raised by the Bank / concerned statutory authorities.
  • The Bank and the RBI approval, on the FIRMS portal, is required before the due date, hence, it is very important to initiate the filing process immediately after the transaction, to avoid delay and consequent penalties.

Sample Form / Data / Document Requirements for the FPI Compliance

Contact Us to proceed for the subscription and the FPI Compliance