Glossary · FEMA & International Tax
FPI
Foreign Portfolio Investment — investment by foreign investors in financial assets like stocks, bonds, and mutual funds without acquiring significant control or management of the company.
FPI is governed by SEBI (Foreign Portfolio Investors) Regulations, 2019 and does not require registration with the RBI. Investments are made through a designated depository participant (DP) and require a Foreign Portfolio Investor (FPI) registration with SEBI. FPI limits are set for each sector: 24% of paid-up capital in Indian companies for the automatic route, extendable to the sector cap by special resolution. FPI inflows are tracked by NSDL and CDSL. NRIs can invest as FPI only if they are not Indian citizens or if they have an overseas office as their primary place of business.
Examples
A Singapore sovereign wealth fund buys $500 million worth of Indian government bonds through an FPI license, earning 7% yield without any company control.