WHAT IS FPI?

A foreign portfolio investment (“FPI”) refers to an investment made by an investor in another

country in the form of assets or securities, including stocks, bonds, mutual funds, etc. FPI
usually consists of passive ownership, wherein stakes acquired are not capable of providing
control over the operation of the company to the investor. It is often called “hot money” due
to its relative liquid nature coupled with its volatility. In India FPIs are regulated by the SEBI
(Foreign Portfolio Investors) Regulations, 2014.

FPIs can make investments through instruments such as;

(a) shares, debentures and warrants (listed or to be listed) on a recognized stock exchange in
India;

(b) listed/unlisted units of mutual funds

(c) units of schemes by a Collective Investment Scheme

(d) derivatives traded on a recognized stock exchange

(e) units of real estate investment trusts, infrastructure investment trusts and units of Category
III Alternative Investment Funds registered with the Board

(f) Indian Depository Receipts

(g) any debt securities or other instruments as permitted by the Reserve Bank of India for
foreign portfolio investors to invest in from time to time

(h) such other instruments as specified by the Board from time to time.

Eligibility criteria for an FPI

The regulations make it mandatory for any person willing to make a foreign portfolio
investment into India to obtain a certificate from SEBI regarding the same. The grant of such
certificate is also privy to certain criteria such as:

a) The applicant must not be a resident Indian, wherein they can be a non-resident Indian
or an overseas citizen of India as well.
b)

CATEGORIES OF FPIs

Category 1 Foreign Portfolio Investor

It includes governments themselves and their related investors such as central banks,
international organizations or agencies at least 75% owned (directly/indirectly) by either the
government or government related investors. It also includes pension funds, university funds,
insurance entities, portfolio managers etc.

Category 2 Foreign Portfolio Investor

(i) appropriately regulated funds not eligible as Category-I foreign portfolio investor; (ii)
endowments and foundations; (iii) charitable organisations; (iv) corporate bodies; (v) family
offices; (vi) Individuals; (vii) appropriately regulated entities investing on behalf of their
client, as per conditions specified by the Board from time to time; (viii) Unregulated funds in
the form of limited partnership and trusts;

CONDITIONS AND RESTRICTIONS ON AN FPI

Only those types of securities which the regulations enunciate, and as mentioned above, are
capable of investment by FPIs.
OBLIGATIONS AND RESPONSIBILITIES