Saving Mantra Blog: Step-by-Step Process for Foreign Portfolio Investment (FPI) in India
Foreign Portfolio Investment (FPI) allows foreign investors, including NRIs, to invest in India’s equity, debt, and derivatives markets. FPIs bring capital inflows, improve market liquidity, and enable global investors to diversify portfolios.
This Saving Mantra guide explains the step-by-step process for investing as an FPI in India, including regulatory compliance, documentation, registration, and reporting.
✔ Step 1: Understand FPI and Eligible Investors
FPI includes investment in:
- Indian stocks/equities
- Corporate and government bonds
- Mutual funds
- Derivatives and ETFs
Eligible Foreign Investors (Categories):
- Category I: Government and regulated entities (sovereign funds, pension funds)
- Category II: Broad-based funds, insurance companies, banks
- Category III: Private investment vehicles, hedge funds, corporate bodies
✔ Step 2: Appoint an Indian Custodian
An FPI must appoint a SEBI-registered custodian to:
- Hold securities in demat form
- Monitor investments
- Submit regulatory reports
Popular custodians include: HSBC, Standard Chartered, Citi, ICICI Bank.
✔ Step 3: Fulfill KYC and Documentation Requirements
KYC is mandatory for FPI registration with SEBI. Required documents:
- Certificate of Incorporation/Registration
- Memorandum & Articles of Association
- Audited financial statements (last 3 years)
- Board resolution authorizing investment
- Proof of identity and address of authorized signatories
- Foreign tax identification number
All documents must be notarized or apostilled, if applicable.
✔ Step 4: SEBI Registration as FPI
- Submit Form A to SEBI via a SEBI-registered Designated Depository Participant (DDP)
- Submit KYC documents
- Pay registration fees (approx. USD 10,000 – 25,000 depending on category)
- SEBI issues FPI Registration Certificate (FPI-RC)
✔ Step 5: Obtain PAN & Demat Account
- PAN (Permanent Account Number) required for all investments
- Open a demat account with the custodian for securities holding
- Open a bank account (FPI bank account) for remittance and settlements
✔ Step 6: Register with Depository (NSDL/CDSL)
FPIs must register with National Securities Depository Limited (NSDL) or Central Depository Services Limited (CDSL) to hold securities in dematerialized form.
✔ Step 7: Fund Transfer & FEMA Compliance
- Remit funds from foreign country via AD Category-I Bank
- Comply with FEMA regulations for repatriation
- Bank issues Foreign Inward Remittance Certificate (FIRC)
- Funds are credited to FPI bank account
✔ Step 8: Start Investing in Indian Markets
FPIs can now invest in:
- Equity shares listed on NSE/BSE
- Corporate bonds and government securities
- Mutual funds and ETFs
- Derivatives trading (if eligible and approved)
All trades must follow SEBI limits and investment caps per sector.
✔ Step 9: Reporting and Compliance
FPIs must comply with:
- Monthly and quarterly reporting to SEBI and custodian
- Transaction reporting (buy/sell)
- Annual financial reporting
- Tax deduction at source (TDS) under Indian Income Tax Act
- Adherence to Investment limits per sector
Non-compliance can lead to penalties or suspension.
✔ Step 10: Repatriation of Profits
- FPIs can repatriate profits, dividends, and sale proceeds freely via AD banks
- Must maintain records for tax and FEMA compliance
Conclusion
Investing in India as an FPI provides foreign investors access to one of the fastest-growing emerging markets. With proper SEBI registration, custodian support, and compliance with FEMA and tax rules, FPIs can invest safely in equities, bonds, and derivatives.
Disclaimer
This blog is for informational purposes only and does not constitute legal, tax, or investment advice. Regulatory and tax rules may change. Investors should consult qualified professionals before making FPI investments in India.