SEBI Eases Compliance for FPIs Investing Only in Government Securities [Read Circular]

These investors, now referred to as GS-FPIs, will benefit from fewer documentation requirements, relaxed reporting norms, and a simplified compliance process.

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Exemption from Investor Group Details

SEBI has exempted GS-FPIs from submitting investor group details at the time of registration. Normally, FPIs are required to provide extensive information on group identities to avoid breaches of investment limits. Now, GS-FPIs investing only in government securities are no longer required to furnish these details.

Relaxation from Ownership and Control Norms

The circular clarifies that certain regulatory provisions concerning ownership, control, and structure of the investing entity will not apply to GS-FPIs but there is one important condition.

If any resident Indian individuals invest in these funds through the Liberalised Remittance Scheme (LRS), then such investment must be routed through global funds with less than 50 percent exposure to India.

Easier Renewal and No Change Declarations

The process of renewing FPI registration every three years has also been simplified for GS-FPIs.

• GS-FPIs now only need to pay the applicable fee to their Designated Depository Participants (DDPs).
• They are not required to inform SEBI of any changes in the previously submitted information.
• They are also exempt from submitting a "no change" declaration, which is otherwise required from regular FPIs.

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Material Changes Still Need to Be Reported

Although GS-FPIs enjoy several exemptions, SEBI has clarified that they must still report material changes to their structure or control. These include both Type I and Type II changes and must be reported within 30 days along with necessary documents.

Mechanism for Transitioning Between Regular FPI and GS-FPI

SEBI has introduced a clear mechanism for transitioning between a regular FPI and a GS-FPI, both ways.

• A new applicant can register as a GS-FPI by making a declaration during onboarding.
• An existing regular FPI can switch to a GS-FPI by declaring their intent to their DDP.

Before the switch, the FPI must sell off all non-government securities and ensure that only government securities are held in their demat account. A GS-FPI can transition back to a regular FPI by submitting the necessary documents and following the standard procedure for full FPI registration.

KYC Review Frequency Aligned with RBI Rules

SEBI has aligned the KYC review frequency for GS-FPIs with the KYC rules prescribed by the Reserve Bank of India (RBI) for their corresponding bank accounts. This means that custodians will not need to conduct KYC reviews more frequently than what RBI requires for the bank accounts held by these investors.

SEBI has directed Depositories, Custodians, and Designated Depository Participants to update their systems accordingly.

A Standard Operating Procedure (SOP) will be formulated by the Custodians and Designated Depository Participants Standards Setting Forum (CDSSF) in consultation with SEBI to ensure uniform implementation of the new framework.

These new provisions will come into effect on February 8, 2026.

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