The Reserve Bank of India (RBI) has introduced a significant liberalisation of the Foreign Portfolio Investment (FPI) framework under Schedule III of the Foreign Exchange Management (Non-debt Instruments) Rules, 2019. The changes follow the notification of the Foreign Exchange Management (Non-debt Instruments) (Third Amendment) Rules, 2026, issued by the Central Government on June 12, 2026, along with corresponding amendments to the Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019.
The amendment marks a major shift in India’s foreign investment regime by expanding eligibility for investments in equity instruments of listed Indian companies. Previously, such investments under Schedule III were restricted to Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs). With the latest amendment, all individual persons resident outside India are now permitted to invest in equity instruments of listed Indian companies through recognised stock exchanges in India, subject to the prescribed investment limits. The revised framework also provides enhanced investment limits, thereby broadening access to India’s capital markets.
To facilitate these investments, Authorised Dealer (AD) Category-I banks have been permitted to open repatriable Indian Rupee accounts for eligible non-resident individuals in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016. These accounts will enable investors to undertake transactions under Schedule III seamlessly. The reporting of such transactions and monitoring of investment limits will continue to follow the procedures currently applicable to investments made by NRIs and OCIs.
The RBI has also clarified the treatment of investments that may exceed the prescribed limits. In cases where investments made under Schedule III require reclassification from Foreign Portfolio Investment to Foreign Direct Investment (FDI), whether due to breach of investment thresholds or other reasons, the process shall be governed by the framework already prescribed for Foreign Portfolio Investors through A.P. (DIR Series) Circular No. 19 dated November 11, 2024.
AD Category-I banks have been directed to ensure strict compliance with the provisions of the amended Rules, Regulations, and applicable Securities and Exchange Board of India (SEBI) regulations. Banks are required to establish appropriate systems, controls, and procedures, and obtain necessary documents and disclosures from investors to ensure adherence to all regulatory requirements.
The directions have come into force with immediate effect. This liberalisation is expected to enhance foreign participation in Indian equity markets, improve capital inflows, increase market liquidity, and further strengthen India’s position as an attractive investment destination for global investors.
