SEBI proposes doubling additional-disclosure threshold for FPIs having Rs 25,000-cr exposure

SEBI proposes raising the threshold for FPIs having Rs 25,000-crore exposure

The market regulator SEBI has proposed doubling the threshold for deciding eligibility of foreign portfolio investors (FPIs) who have to make additional disclosures.

One of the criteria to determine the eligibility of these FPIs is their exposure to the Indian securities market. Currently, FPIs who hold more than Rs 25,000 crore of equity assets under management (AUM) in the Indian market have to make these disclosures.

In a consultation paper issued on January 10, SEBI has suggested raising the bar to an AUM of Rs 50,000 crore, to keep in line with the increase in market volumes.

The circular said, "Under the additional disclosure framework for FPIs specified vide SEBI’s Circular dated August 24, 2023 (“August Circular”), with a view to guard against potential circumvention of Press Note 3 stipulations, certain FPIs/investor groups with equity assets under management (‘AUM’) exceeding Rs 25,000 crore are required to provide granular details of all their investors/stakeholders on a look-through basis. Given the rise in market volumes since the limit was set, it is proposed to increase such threshold from Rs 25,000 crore to Rs 50,000 crore."

The size criteria had been set to guard against potential circumvention by FPIs of Press Note 3 stipulations, this was particularly a worry with large FPIs who have the potential to disrupt the Indian markets. Press Note 3 had been issued in 2020 to regulate the money coming from land bordering countries, and it made it mandatory for these direct and indirect investments coming into the country to take government approval.

The circular said, "The ‘potential to disrupt the functioning of market’ has to be evaluated relative to the size of the market. In this regard, a broad market parameter such as turnover can be used as a factor to assess the size of market. Data for average daily turnover (in capital market segment at NSE) for the FY 2022-23 and FY 2024-25 (till December 2024) shows an increase of 122 percent."