SEBI, RBI Ease Rules to Woo Foreign Investors Amid Slow Inflows

The Securities and Exchange Board of India (SEBI) and the Reserve Bank of India (RBI), are planning to loosen rules for foreign investors to encourage more money flowing into the country’s markets. This comes as foreign portfolio investors (FPIs) have withdrawn over $15 billion from Indian stocks this year, the largest outflow in three years, due to global economic uncertainties and high stock valuations, according to a reports.

The report says SEBI and RBI will meet with a group of major global investors next week to discuss simplifying the investment process. Proposed changes include making it easier for foreign investors to register, cutting down on paperwork, and speeding up approvals from the current 10-15 days to less than a week. SEBI is also looking at allowing more types of investors, like sovereign wealth funds and pension funds from emerging markets, which have been put off by strict Know Your Customer (KYC) requirements.

"We recognize that regulatory friction is a barrier in today's volatile environment," a senior SEBI official told the newspaper anonymously. "These reforms aim to make India more investor-friendly without compromising oversight." RBI Governor Shaktikanta Das recently hinted at similar efforts, suggesting that these reforms could bring in $20-30 billion in new investments by the end of 2025.

India’s stock market has been struggling, with the Nifty 50 and Sensex indices dropping nearly 8% since August, performing worse than other Asian markets. Foreign investors, who own about 20% of India’s market, have been selling off for eight months straight, citing U.S. interest rate hikes and global tensions in Europe and the Middle East. While Indian mutual funds have cushioned some of the impact, experts warn that a lack of foreign cash could cause bigger problems.

Industry experts are optimistic. "Streamlining FPI rules is long overdue; it will signal India's commitment to global integration," said Ajay Bagga, former CEO of Edelweiss Securities. However, some worry that relaxed rules could lead to unpredictable market swings from short-term investors.

The visiting investor group, including representatives from BlackRock, Temasek, and Abu Dhabi Investment Authority, is likely to push for tax breaks and digital registration systems. SEBI Chairperson Madhabi Puri Buch has made “ease of doing business” a priority, following recent updates to mutual fund rules.

If these changes roll out quickly, they could make India as attractive as markets like Singapore or Dubai, boosting investor confidence. As one fund manager put it, “India’s growth story is still strong—now it’s about making it easier to join in.”

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Official details are expected during the October policy review, and stakeholders are hopeful this will spark a revival in India’s markets.