FPIs Want Longer Licenses and Better Trading Tools in Indian Markets

Foreign investors who put money into Indian stocks are asking the Indian market regulator, SEBI, for some big changes. These investors, called Foreign Portfolio Investors (FPIs), want their licenses to last longer and are also pushing for a new trading feature that could make pricing more accurate at the end of the trading day.

Let’s break down what they’re asking for — and why it matters.

What Are FPIs and Why Are They Important?

FPIs are big investors from outside India who invest in the Indian stock market. These include foreign mutual funds, pension funds, and even global banks. The money they bring in helps boost our markets, provides liquidity, and can lead to better valuations for Indian companies.

But FPIs have to follow certain rules laid out by SEBI (Securities and Exchange Board of India), which is India’s market regulator. Now, many of these investors are saying that some of those rules are outdated or unnecessarily complicated.

FPIs Want Licenses That Last Longer

Currently, FPIs need to renew their licenses every three years. Each renewal requires paperwork, fees, and time — not just for the investors, but for regulators too. Now, many FPIs are asking SEBI to extend the license duration to five years.

Their argument is simple: if an investor is well-regulated and has a clean record, there’s no need to check up on them so frequently. A longer license period would make it easier for foreign investors to operate in India without getting bogged down in red tape.

Push for a ‘Closing Auction Session’ in Trading

Another major request from FPIs is the introduction of something called a Closing Auction Session (CAS). This is a small trading window that happens right after the regular trading hours end.

Why is this important? Because it helps determine more accurate closing prices for stocks. For many global investors who track stock indices (like the Nifty or Sensex), having an accurate end-of-day price is crucial. It helps them manage their portfolios better and match the actual market performance.

Markets in countries like the US, Japan, and Hong Kong already use CAS. So, FPIs are urging SEBI to implement it in India too, to bring our market practices closer to global standards.

Privacy Concerns Around Investor Details

SEBI currently requires FPIs to share a lot of information about who is behind the investments — basically, the ultimate owners or decision-makers. This is done for transparency and to prevent money laundering or suspicious activities.

But FPIs, especially large global funds, say this rule is too intrusive. Many of these funds already follow strict rules in their home countries, and revealing personal details of investors can breach their privacy norms. They are now asking SEBI to relax these disclosure rules, especially for funds that are already regulated elsewhere.

SEBI Has Been Making Reforms — But FPIs Want More

To be fair, SEBI has already made some changes to make life easier for FPIs. Over the last few years, the regulator has:

• Simplified the registration process.

• Reduced the number of FPI categories to just two (Category I and II).

• Relaxed KYC (Know Your Customer) rules by allowing online documentation and accepting digital IDs like e-PAN.

• Made it easier for FPIs to transfer certain types of unlisted or less liquid securities.

Despite these positive steps, FPIs feel that more needs to be done — especially if India wants to stay attractive compared to other fast-growing markets.

Why This Matters for India

If SEBI agrees to these changes, it could make Indian markets even more appealing to foreign investors. That means more money flowing into Indian companies, more stability in the markets, and potentially better returns for everyone — including Indian retail investors.

It also shows that India is open to aligning itself with international practices, something that is often looked at positively by global financial institutions.

What’s Next?

SEBI hasn’t officially responded to the latest set of requests yet, but discussions are ongoing. The next few months will be important in deciding whether India will update some of its rules to keep pace with what global investors expect.

For now, FPIs are waiting — but their message is clear: if India wants to remain a top investment destination, a little more flexibility and modernization would go a long way.