In a significant move to ease compliance requirements for foreign portfolio investors (FPIs), the Securities and Exchange Board of India (Sebi) on Friday relaxed know-your-customer (KYC) norms, extending the periodic review cycle to as long as eight years from the existing one to three years.
The revised framework, which will come into effect on December 1, seeks to reduce repetitive compliance requirements and make it easier for foreign investors to participate in Indian capital markets.
Under the new norms, the frequency of KYC reviews will depend on the jurisdiction, category and regulatory status of FPIs. For specified categories, the review cycle has been extended from one year to two years and from three years to eight years.
Category I FPIs operating in non-high-risk jurisdictions will now be required to undergo KYC reviews once every eight years, compared with the earlier three-year cycle. Those operating in high-risk jurisdictions will be subject to reviews every two years. Category II FPIs operating in high-risk jurisdictions will also undergo KYC reviews every two years.
The relaxation is expected to reduce the administrative burden on foreign investors and intermediaries, particularly those subject to frequent documentation and verification requirements.
In another change, Sebi has done away with the separate requirement for FPIs to intimate changes in previously submitted information or furnish a no-change declaration at the time of continuation of registration.
The move eliminates an additional burden of compliance, as FPIs are already required to update relevant information under existing regulatory provisions.
However, the regulator has retained the existing KYC requirements for FPIs investing exclusively in government securities (GS-only FPIs) and those registered under the SWAGAT-FI framework.
For GS-only FPIs, KYC reviews will continue to follow the periodicity applicable to their respective bank accounts, as prescribed by the Reserve Bank of India (RBI). The review cycle for SWAGAT-FI FPIs will remain unchanged at 10 years.
“The measure seeks to rationalise multiple requirements of similar nature, reduce repetitive compliance and ease the compliance burden on FPIs, thereby promoting ease of doing business,” Sebi said.
By extending review intervals and removing overlapping requirements, the regulator aims to make the compliance framework less cumbersome while retaining safeguards for monitoring foreign investment flows into Indian markets.