SEBI amends FPI norms; permits net settlement for outright cash trades

The Securities and Exchange Board of India (SEBI) has amended its earlier circular to permit net settlement of funds for outright transactions undertaken by Foreign Portfolio Investors (FPIs) in the cash market.The regulator on Friday, April 24, clarified that “outright transactions” refer to either a purchase or a sale transaction in a security during a settlement cycle, but not both.

The new framework is to be implemented on or before December 31, 2026, with custodians and other market participants required to update their systems accordingly.
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Under the revised framework, such outright buy or sell transactions can be netted to determine the net fund obligation, aimed at reducing liquidity requirements and improving operational efficiency for FPIs.However, transactions involving both purchases and sales in the same security within a settlement cycle will continue to be settled on a gross basis.

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SEBI said the move follows industry feedback highlighting higher funding costs and operational challenges under the existing gross settlement system, especially during periods such as index rebalancing.

The regulator added that settlement of securities between FPIs and custodians will continue on a gross basis, while statutory levies like Securities Transaction Tax (STT) and stamp duty will remain unchanged.