SEBI Revises FPI Norms, Allows Net Settlement for Cash Trades to Ease Liquidity Constraints

As per The CNBCTV18 report, The Securities and Exchange Board of India (SEBI) has introduced amendments to the FPI norms, enabling net settlement for outright cash trades by Foreign Portfolio Investors (FPIs) by December 31, 2026, to alleviate liquidity constraints and improve efficiency. 

Details of the SEBI Amendment 

On April 24, 2026, SEBI clarified that the net settlement would apply only to outright purchase or sale transactions conducted within a single settlement cycle. This revision intends to reduce liquidity demands and streamline operations for FPIs.  

However, mixed transactions incorporating both purchases and sales of the same security within a cycle will still adhere to a gross settlement basis. 

Rationale Behind the Amendment 

SEBI’s decision comes in light of industry feedback pointing to elevated funding costs and operational challenges under the gross settlement model.  

The changes are designed to mitigate these issues, especially during periods of index rebalancing which require significant financial manoeuvres.  

Read More: SEBI Plans Dynamic Price Band for All F&O Stocks as Entry-Exit Day Distortions to be Eliminated! 

Implementation Timeline and Requirements 

All relevant systems maintained by custodians and market participants must reflect these changes by December 31, 2026. The ongoing securities settlement between FPIs and custodians will persist on a gross basis.  

Regulatory levies, including the Securities Transaction Tax (STT) and stamp duties, will remain unaffected by this amendment. 

Significance for FPIs 

The ability to net funds for outright transactions is a significant step in enhancing the ease of trading for FPIs within the Indian market.  

This could lead to more efficient resource allocation and reduced transactional complexities, benefiting foreign investors looking to optimise their trading strategies in the Indian equities market. 

Conclusion 

The amendment by SEBI to allow net settlement for outright cash trades is aimed at reducing the liquidity burden for FPIs while maintaining rigorous settlement standards. By December 31, 2026, this change will be fully integrated, reflecting SEBI's responsiveness to industry needs. 

Disclaimer: This blog has been written exclusively for educational purposes. The securities or companies mentioned are only examples and not recommendations. This does not constitute a personal recommendation or investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

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