The Securities and Exchange Board of India has widened a compliance relief for foreign portfolio investors holding only government securities, extending an exemption that was earlier confined to a single investment channel so that it now covers every route into the market. The change takes effect immediately from September 7, 2026.
What SEBI’s Latest Circular Changes
In a circular numbered HO/(485)2026-AFD-POD2/I/20296/2026, SEBI amended its Master Circular for FPIs, Designated Depository Participants, and Eligible Foreign Investors to state that such investors “shall not be required to furnish investor group details.”
When SEBI first carved out this relief in September 2025, it applied only to FPIs investing through the Fully Accessible Route (FAR). The new circular removes that restriction, extending the exemption to FPIs investing only in government securities irrespective of which route they use to access the market.
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Why the Investor-Group Rule Became Redundant
The trigger is a June 5, 2026 RBI circular that withdrew the requirement for FPIs investing in government securities through the General Route to comply with a prescribed concentration limit. SEBI had originally required investor-group identification to monitor compliance with that limit. With the limit itself gone, SEBI said tracking investor groups for FPIs investing only in government securities was “no longer relevant.”
FPI Footprint in India’s G-Sec Market
As of May 12, 2026, FPIs held ₹3.75 lakh crore in Indian government securities, equal to 3.34% of the ₹112.42 lakh crore in total outstanding G-Sec stock. Of this, ₹3.21 lakh crore came through the FAR route, representing 6.74% of the ₹47.63 lakh crore in FAR-eligible securities. That concentration explains why SEBI’s 2025 carve-out targeted FAR first — and why extending it to the General Route now closes a compliance gap for the remaining pool of sovereign-debt-only FPIs.
(Track daily FII/DII activity on NiftyTrader’s FII-DII Tracker: niftytrader.in/fii-dii-data)
Operational Changes for Depositories and Custodians
SEBI has directed depositories, custodians, and Designated Depository Participants to update their systems to reflect the revised requirement. The circular was issued under Section 11(1) of the SEBI Act, 1992, read with Regulations 22(1), 22(3), 22(5) and 44 of the SEBI (Foreign Portfolio Investors) Regulations, 2019.
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Disclaimer: This article is based on a SEBI circular and public regulatory disclosures. It is for informational purposes only and does not constitute investment advice. NiftyTrader.in is a SEBI-registered platform; readers should consult a SEBI-registered investment advisor before making any investment decisions.
