Market regulator, the Securities and Exchange Board of India (SEBI), has relaxed know-your-customer (KYC) requirements for foreign portfolio investors (FPIs), extending the time between mandatory reviews from three years to eight years for certain categories of investors. The move is aimed at reducing paperwork and making it easier for foreign investors to do business in India.
FPIs are broadly classified into Category I and Category II based on their regulatory status, the nature of their investors and associated risks. Category I includes investors such as government-related entities, appropriately regulated funds and certain institutional investors that are considered to have a relatively lower risk profile. Category II covers a wider range of investors, including appropriately regulated entities and other eligible funds and institutions that do not qualify for Category I.
Under the revised rules announced on Friday, the KYC review period will be extended from one year to two years and from three years to eight years, depending on the category and risk profile of the investor. The changes will come into effect from December 1, 2026.
At present, FPIs have to undergo periodic KYC reviews every one or three years, depending on their jurisdiction, category and regulatory status. With the new framework, several categories of foreign investors will have to complete the exercise less frequently.
For high-risk Category I FPIs registered under a specific regulatory provision, the review period has been extended to eight years. Other high-risk Category I investors and high-risk Category II investors will have to undergo reviews once every two years.