SEBI Streamlines Markets: Net Settlement for FPIs and Easier Rules for REITs, InvITs
SEBI approves net settlement for FPIs and eases rules for REITs and InvITs to improve efficiency.
The Securities and Exchange Board of India (SEBI) on Monday approved several key measures aimed at improving operational efficiency for foreign portfolio investors (FPIs) and easing the regulatory framework for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs).
Net Settlement for FPIs
Under the current system, FPIs settle equity cash market trades on a gross basis, requiring separate funding for each purchase, even if offset by same-day sales. SEBI has now cleared the proposal for “netting of funds,” allowing FPIs to use proceeds from same-day sales to offset purchase obligations, paying only the net amount.
Also Read: New SEBI Rules from April 1 Limit Intraday Borrowing for Mutual Funds
The measure is expected to reduce funding costs, especially during index rebalancing days, and minimise forex-related expenses arising from timing mismatches. Implementation of the new system is planned on or before December 31, 2026.
Key Reforms for REITs and InvITs
SEBI has also approved measures to enhance ease of doing business for REITs and InvITs:
-
InvITs can continue holding investments in special purpose vehicles (SPVs) post-concession agreement, but must exit or invest in a new project within a year of completion, pending claims settlement, or end of defence liability period.
-
Privately listed InvITs can invest up to 10% of asset value in Greenfield infrastructure projects.
-
InvITs with 49–70% leverage are permitted fresh borrowings for capital expenditure.
Corporate Governance and Investor Protection
The board approved tighter “Fit and Proper” norms for key personnel, clarifying that only a final winding-up order, not mere initiation, will be considered in disqualification assessments. SEBI also proposed clearer rules guaranteeing a right to a hearing and introduced tougher conflict-of-interest disclosure requirements.
Flexibility for AIFs
Additional reforms include:
-
Greater flexibility for Alternative Investment Funds (AIFs) in scheme winding-up procedures.
-
Introduction of a framework to classify certain AIFs as “inoperative funds” with lighter compliance until their registration is surrendered.
-
Reduction in the minimum investment for individual investors in Social Impact Funds from Rs 2 lakh to Rs 1,000.
These measures were approved at the fifth board meeting chaired by SEBI Chairman Tuhin Kanta Pandey since assuming office on March 1, 2025, reflecting the regulator’s focus on operational efficiency, investor protection, and market development.
This suite of reforms is expected to streamline fund operations, improve liquidity management for FPIs, and enhance the attractiveness of REITs and InvITs as investment vehicles.
Also Read: Sensex, Nifty Fall 2% As West Asia Tensions Escalate
