The Finance Ministry announced measures to simplify foreign investment in Indian equities and government securities, aiming to attract stable long-term foreign capital. In the Union Budget FY 2026-27, Finance and Corporate Affairs Minister Nirmala Sitharaman expanded the Portfolio Investment Scheme to allow individual Persons Resident Outside India (PROI) to invest in listed Indian companies.
Under this scheme, the investment limit for an individual PROI will increase from 5% to 10% in any company, with an overall investment cap for all individual PROIs set at 24%. The Department of Economic Affairs is set to implement these changes through the Foreign Exchange Management (Non-Debt Instruments) (Third Amendment) Rules, 2026.
The notification is expected to streamline foreign portfolio capital mobilization by utilizing existing onboarding systems for NRI/OCI investors. This move aims to simplify onboarding processes, reduce compliance requirements, and attract a broader base of stable individual foreign investors, ultimately supporting increased foreign inflows into Indian equity markets.
The government plans to enhance FPI participation in government securities by expanding the Fully Accessible Route to include new issuances in various tenors and Sovereign Green Bonds. Additionally, restrictions on FPI investments under the General Route will be lifted, while maintaining quantitative investment limits for Central and State Government securities.
These initiatives seek to develop a smooth yield curve, encourage long-term foreign investments from entities like pension funds and sovereign wealth funds, and boost foreign exchange inflows for the country. Furthermore, interest and capital gains on FPI investments in government securities will be exempt from income tax starting April 1, 2026.
