Ease of regulatory compliances for FPIs investing only in Government Securities

 SEBI Circular dated 7 September 2026 titled “Ease of regulatory compliances for FPIs investing only in Government Securities.”

1. Background

SEBI had, through its circular dated 10 September 2025, already provided a regulatory relaxation for FPIs investing exclusively in Government Securities under the Fully Accessible Route (FAR). Such FPIs were not required to furnish investor group details.

The latest circular extends this relaxation further by removing the requirement for investor-group identification for all FPIs investing only in Government Securities, irrespective of the route through which such investment is made.

2. Key Regulatory Change

The earlier provision stated:

“FPIs that invest exclusively in Government Securities under Fully Accessible Route shall not be required to furnish investor group details.”

This has now been replaced with the broader provision:

“FPIs investing only in Government Securities shall not be required to furnish investor group details.”

The significant point is the deletion of the reference to the Fully Accessible Route.

Accordingly, the relaxation is now applicable to FPIs whose investments are confined exclusively to Government Securities, without restricting the benefit to FPIs investing through FAR.

3. Reason for the Amendment

The circular explains that the Reserve Bank of India, through its circular dated 5 June 2026, withdrew the requirement for FPIs investing in Government Securities through the General Route to comply with the prescribed concentration limit.

As a consequence, SEBI considers the identification of an investor group for an FPI investing exclusively in Government Securities to be no longer relevant. The requirement has therefore been removed.

4. Practical Impact on FPIs

The amendment provides a meaningful compliance simplification for eligible FPIs.

An FPI whose portfolio consists only of Government Securities will no longer be required to furnish investor-group details to the DDP/custodian/depository framework.

This should particularly reduce:

• documentation requirements at the time of registration/onboarding;
• ongoing information gathering and maintenance relating to investor groups;
• compliance burden for FPIs with relatively simple Government Securities investment strategies;
• administrative interaction between FPIs and their DDPs/custodians concerning investor-group information.

However, the relaxation is specifically linked to the FPI investing only in Government Securities. The circular does not state that investor-group information requirements have been generally abolished for FPIs investing in other securities.

5. Impact on DDPs, Custodians and Depositories

The circular expressly directs Depositories, Custodians and Designated Depository Participants (DDPs) to make the necessary changes to their systems to implement the amendment.

Therefore, the operational impact is not merely documentary. Relevant intermediaries will need to ensure that their:

• onboarding processes;
• FPI master-data requirements;
• KYC/compliance workflows;
• system-generated forms and checklists; and
• internal controls

appropriately recognise the exemption for qualifying FPIs.

6. Immediate Effect

The amendment comes into force with immediate effect from 7 September 2026.

This means that DDPs and other relevant intermediaries should apply the revised requirement to eligible FPIs without waiting for a further implementation notification.

7. Compliance Interpretation

From a compliance perspective, the critical eligibility test is now straightforward:

FPI + investment exclusively in Government Securities = investor-group details not required.

The important qualification is “only in Government Securities.”

Accordingly, an FPI that also invests in equities, corporate debt or other permitted securities would not, merely by virtue of holding some Government Securities, fall within this particular relaxation. The circular itself does not extend the exemption to such mixed portfolios.

8. Overall Significance

The amendment represents a further move towards rationalising FPI compliance requirements where the underlying regulatory concern is no longer applicable. Since the RBI has removed the concentration-limit requirement for Government Securities under the General Route, SEBI has correspondingly removed the associated investor-group identification requirement.

In practical terms, the amendment creates a route-neutral relaxation for FPIs investing exclusively in Government Securities and eliminates an information requirement that SEBI considers redundant in that context.

From a compliance perspective, the principal takeaway is: when reviewing an FPI's compliance documentation, investor-group details should no longer be insisted upon where the FPI's investment is restricted exclusively to Government Securities. The exemption should nevertheless be applied carefully, after establishing that the FPI satisfies the “investing only in Government Securities” condition.