Who Qualifies as a Foreign Portfolio Investor?

To be classified as an FPI, an applicant must:

1. Not be a resident of India.
2. Reside in a country that has a bilateral Memorandum of Understanding (MoU) with SEBI or whose securities market regulator is a signatory to the International Organisation of Securities Commissions (IOSCO) Multilateral MoU.
3. Not be from a country identified by the Financial Action Task Force (FATF) as having anti-money laundering deficiencies.
4. If a bank, the applicant must reside in a country whose central bank is a member of the Bank for International Settlements (BIS).
5. Not be a Non-Resident Indian (NRI).
6. Have the legal authority to invest in securities outside their home country.
7. If a corporate entity, be authorized by its Memorandum of Association (MoA) and Articles of Association (AoA).
8. Demonstrate sufficient experience, a good track record, and financial stability.
9. Meet the "fit and proper" criteria set by SEBI.

Categories of Foreign Portfolio Investors

FPIs are categorized into three groups based on their nature and the regulatory framework:

Category 1

• Government entities, such as foreign central banks and sovereign wealth funds.
• Pension funds and university funds.
• Appropriately regulated entities (e.g., insurance companies, banks).
• Entities from FATF member countries.

Category 2

• Appropriately regulated funds not classified under Category 1.
• Endowments, foundations, and charitable organizations.
• Corporate bodies and family offices.

Category 3

• Other eligible foreign investors, such as trusts, individuals, and family offices.

Regulatory Requirements for Foreign Portfolio Investors

1. SEBI Registration: Mandatory registration through a designated custodian (Designated Depository Participant or DDP).
2. PAN Number: Essential for tax filing in India.
3. Bank Accounts: Both foreign currency and INR accounts are required.
4. Depository Accounts: One per entity, necessary for holding securities.
5. Investment Types: FPIs can invest in listed securities, mutual funds, government bonds, and derivatives, among others.
6. Investment Limits: Specific limits apply to equity shares, government securities, and corporate bonds.

FPI Registration Process

1. Apply for Registration: Submit Form “A” and KYC forms to your DDP.
2. Tax Registration: Obtain necessary tax registrations with the help of a CPA.
3. Open Bank Accounts: Establish rupee bank accounts in India.
4. Set Up Custody and Depository Accounts: Your DDP will handle this.
5. Open a Trading Account: Appoint a broker and complete necessary formalities