Sebi Board To Consider FPI Settlement Reforms, Governance Overhaul
India’s capital markets regulator Securities and Exchange Board of India (Sebi) is set to hold a board meeting on Monday to deliberate on a wide-ranging agenda, including proposals to ease fund settlement norms for foreign portfolio investors (FPIs) and introduce changes to regulatory frameworks for market intermediaries.A key proposal under consideration is to allow FPIs to net funds for same-day cash market trades. Under the current system, FPIs are required to settle transactions on a gross basis, meaning each purchase must be funded independently of any same-day sales. The proposed “netting of funds” mechanism would enable investors to offset purchase obligations against proceeds from sales, requiring them to settle only the net payable amount.
The move is aimed at improving operational efficiency and reducing funding costs for FPIs, particularly during high-volume periods such as index rebalancing. It is also expected to lower foreign exchange costs arising from timing mismatches between inflows and outflows.
The proposal follows industry concerns that the existing gross settlement framework increases funding requirements by at least one additional day, thereby raising transaction costs.
The meeting will be chaired by Tuhin Kanta Pandey and marks his fifth board meeting since assuming office in March 2025.
In addition to FPI-related reforms, the board is expected to review several governance proposals, including a revamp of the “fit and proper person” criteria for market intermediaries. The proposed changes aim to enhance procedural clarity and fairness, including removing the initiation of winding-up proceedings as a disqualification and limiting such considerations to final orders.
Sebi is also considering explicitly incorporating the right to a hearing into its regulations, formalising an existing practice to eliminate procedural ambiguity.
Further, the board will discuss ease-of-doing-business measures for real estate investment trusts (REITs) and infrastructure investment trusts (InvITs), as part of broader efforts to streamline regulatory processes.
Another key agenda item is a report by a high-level panel on conflict of interest and transparency, which recommends enhanced disclosure norms and a “zero-tolerance” approach to conflicts involving senior Sebi officials.
The outcomes of the meeting are expected to shape the next phase of regulatory reforms aimed at improving market efficiency and governance standards.
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