New Delhi, June 5 (IANS). The Finance Ministry on Friday said that the government has taken several important steps to simplify and widen foreign investment in Indian equity i.e. stock market and government securities. These measures are aimed at attracting stable and long-term foreign capital inflows.
Finance and Corporate Affairs Minister Nirmala Sitharaman had announced in the Budget for FY 2026-27 that individual foreign nationals (PROIs) resident outside India will be allowed to invest in equity shares of listed Indian companies through the Portfolio Investment Scheme (PIS). Earlier this facility was limited only to NRIs (Non-Resident Indians) and OCI (Overseas Citizens of Indian Origin).
According to the Finance Ministry, under this scheme, the investment limit of individual PROI in any one company will be increased from 5 percent to 10 percent. At the same time, the total investment limit for all individual PROIs will be increased from the existing 10 percent to 24 percent.
To implement this change, the Department of Economic Affairs (DEA) is issuing the notification of Foreign Exchange Management (Non-Debt Instruments) (Third Amendment) Rules, 2026.
The ministry said the move will enable it to more actively attract foreign portfolio capital using the registration and investment regime already in place for NRI and OCI investors.
The government believes that simplified registration process and lower compliance requirements will increase ease of doing business. Along with this, the scope of relatively stable foreign individual investors will also widen.
With this, the flow of foreign investment in the Indian stock market is expected to become more and stable.
The government is also expanding the scope of the fully accessible route (FAR) to increase participation of foreign portfolio investors (FPIs) in government securities.
Under this, new government securities with tenors of 15 years, 30 years and 40 years as well as Sovereign Green Bonds with FAR eligible tenors will also be included in it.
The government has decided to remove three major restrictions applicable for FPI investments under the general route, including short-term investment limits, investment concentration limits and security-specific investment limits.
However, the overall investment limit of 6 per cent of the outstanding stock of Central Government Securities and 2 per cent of State Government Securities (SGS) will remain in place.
According to the Finance Ministry, these measures will develop a better yield curve in the government bond market and increase investment by long-term and stable investors such as pension funds, insurance companies and sovereign wealth funds.
Along with this, foreign exchange flow in the country will also get strengthened.
The government has also announced that interest and capital gains on investments made by FPIs in government securities will be exempted from income tax. This provision will be effective from 1 April 2026.
The Finance Ministry said that all these reforms are aimed at reducing operational complexities, simplifying market access and providing a seamless experience to investors that is at par with the world’s major international financial markets.
–IANS
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