Archive · 17 Jan 2026
SEBI Proposes Netting for FPIs
The Securities and Exchange Board of India (SEBI) has proposed a new rule that would allow foreign investors to use the money from their sales to pay for their purchases on the same day, instead of paying for each trade separately.
This is called netting of funds.
Currently, foreign investors have to pay for each buy and sell order individually, which can be costly and complicated.
This change is expected to make investing in Indian markets easier and more attractive for foreign investors, potentially bringing more money into the country.
SEBI released a consultation paper to gather feedback on this proposal.
The proposal also includes a unified registration process to minimize repeated compliance requirements for foreign investors.
SEBI proposed allowing netting of funds for FPI transactions in the cash market to enhance operational efficiency and reduce costs.
Netting would enable FPIs to use proceeds from sale transactions to fund purchase transactions on the same day, reducing net fund obligations.
Current regulations require FPIs to settle each transaction separately, leading to additional liquidity demand and inefficiency.
The proposal excludes netting for transactions where there are both buy and sale transactions in the same security within a settlement cycle.
SEBI also proposed a unified registration process to minimize repeated compliance requirements for FPIs and Foreign Venture Capital Investors (FVCIs).
- Who
- Securities and Exchange Board of India (SEBI)
- What
- Proposed allowing netting of funds for FPI transactions in the cash market
- When
- Proposal announced on Friday
- Where
- India
- Why
- To enhance operational efficiency and reduce costs for foreign investors
Supporters of the Proposal
Opponents of the Proposal
Operational Efficiency
Supporters of the Proposal
The proposal will enhance operational efficiency by reducing the number of transactions that need to be settled.
Opponents of the Proposal
Opponents argue that netting could lead to increased complexity in tracking and reconciling trades.
Cost Reduction
Supporters of the Proposal
The netting mechanism will reduce the cost of funding for FPIs, especially on index rebalancing days.
Opponents of the Proposal
Opponents believe that the potential savings may not be significant enough to justify the changes in the settlement process.
Market Stability
Supporters of the Proposal
The proposal ensures that non-outright transactions are confirmed on a gross basis, addressing the risk of market manipulation by large FPIs.
Opponents of the Proposal
Opponents are concerned that netting could lead to increased market volatility due to the concentration of trades.
- Proposed Change
- Allow netting of funds for outright transactions in the cash market
- Current Requirement
- FPIs must settle each transaction separately on a gross basis
- Expected Benefit
- Reduce costs and enhance operational efficiency for FPIs
- Regulator
- Securities and Exchange Board of India (SEBI)
- Purpose
- Enhance operational efficiency and reduce funding costs for foreign investors
- Unified Registration
- Enable a unified registration process across multiple investment routes
- Beneficiaries
- Existing and new FPIs that meet specified eligibility criteria
Sources
Sebi proposes permitting trade netting for foreign portfolio investors
SEBI proposes fund netting for FPIs to cut funding costs
SEBI proposes netting of funds for FPI transactions in cash market
SEBI proposes ‘netting’ mechanism for FPIs’ cash market transactions
