Government opens equities and G-Secs wider to foreign investors

Individual overseas investors can now buy listed Indian shares like NRIs, and FPI access to long-tenor government bonds and Sovereign Green Bonds is being expanded.

What happened

• The Ministry of Finance announced a set of measures to deepen India's capital markets and ease investment for individual Persons Resident Outside India (PROIs) and Foreign Portfolio Investors (FPIs).
• On equities: individual PROIs can now invest in listed Indian companies through the Portfolio Investment Scheme (PIS) — hitherto open only to NRIs/OCIs — with the per-investor limit raised from 5% to 10% in a company and the overall PROI limit from 10% to 24%.
• This is being implemented via the FEMA (Non-Debt Instruments) (Third Amendment) Rules, 2026, giving effect to a Union Budget FY2026-27 announcement.
• On government securities: the Fully Accessible Route (FAR) is being expanded to include new issuances of G-Secs in 15, 30 and 40-year tenors and Sovereign Green Bonds (SGrBs) in FAR-eligible tenors.
• For FPI investment under the General Route, three restrictions are being removed — the short-term investment limit, the concentration limit and the security-wise limit.
• The stated goal is to attract stable, long-term foreign capital and make investment in Indian equities and bonds more accessible and globally competitive.

For Prelims

• Who is a PROI: a 'Person Resident Outside India' is the broad FEMA category for any non-resident; this reform extends the equity route beyond just NRIs/OCIs to individual foreign investors generally.
• Portfolio Investment Scheme (PIS): the RBI route through which non-residents buy/sell listed Indian shares on the stock exchanges within prescribed limits — now opened to individual PROIs.
• Fully Accessible Route (FAR): a category of specified government securities in which FPIs face no investment ceiling. Adding 15/30/40-year bonds and SGrBs to FAR deepens long-tenor demand — key for India's inclusion in global bond indices.
• Sovereign Green Bonds (SGrBs): government bonds whose proceeds fund green/climate projects; widening FAR access to them links bond-market reform to climate finance.
• Why it matters: deeper foreign participation in G-Secs lowers government borrowing costs and supports India's place in global bond indices (e.g., JPMorgan GBI-EM), bringing stable inflows.
• The three removed limits: the short-term (cap on under-1-year holdings), concentration (cap per investor across a security class) and security-wise (cap per individual security) limits — their removal eases FPI G-Sec investment.
• Regulators in the chain: RBI (FEMA/G-Secs), SEBI (FPIs/equities) and the Department of Economic Affairs (notifies FEMA rules) — a clean institutions map.
• Caveat to hold: larger foreign portfolio flows also raise exposure to hot-money volatility — the standard trade-off in opening capital markets.

For Mains

Syllabus: GS3.8 · GS3.3 · Linkage L2