On October 16, 2024, SEBI announced process improvements to enhance operational efficiency for Foreign Portfolio Investors (FPIs), addressing concerns about delays in accessing sale proceeds. Previously, FPIs faced delays due to the tax clearance process under FEMA regulations, which slowed down the settlement process compared to domestic institutional investors. After consultations with stakeholders such as custodians, clearing corporations, and tax consultants, SEBI implemented new measures on September 9, 2024. The revised system ensures that tax certificates for FPI sale trades executed on ‘T’ day are issued by 9:00 AM IST on ‘T+1’ day. This allows FPIs to receive sale proceeds on the settlement day itself, either for reinvestment or repatriation. This move is expected to generate efficiency gains of approximately INR 2,000 Crore annually, aligning FPIs with domestic institutional participants in terms of settlement timelines. SEBI views these improvements as a step towards maintaining India’s attractiveness as a competitive investment destination.
Securities and Exchange Board of India
PR No. 26/2024
Process improvements under SEBI’s initiative make sale proceeds available to Foreign Portfolio Investors (FPIs) on settlement day itself
In a move to enhance operational efficiency and respond to concerns raised by Foreign Portfolio Investors (FPIs), SEBI has introduced measures to speed up the availability of sale proceeds for FPIs, bringing them on par in this regard with domestic institutional investors.
FPIs previously reported delays in their access to sale proceeds beyond the standard ‘T+1’ settlement date. These delays were primarily due to the erstwhile process adopted for obtaining tax clearance on their net sale proceeds, to ensure compliance with FEMA Regulations.
To address this issue, SEBI engaged in consultations with key stakeholders, including FPIs, clearing corporations, custodians, and tax consultants. This collaborative effort led to significant process improvements, making sale proceeds available to FPIs on settlement day, bringing them on par with domestic institutional participants.
Under the new system, in place since September 9, 2024, tax certificates for FPI sale trades executed on ‘T’ day are issued by tax consultants by 9:00 AM IST on ‘T+1’ day. This allows FPIs to access sale proceeds, either for repatriation or for reinvestment, on the same ‘T+1’ day. It is broadly estimated that efficiency gains on account of these revised processes would be around INR 2,000 Crore per annum.
SEBI believes these steps will reinforce India’s position as a preferred and efficient investment destination for FPIs, reflecting the regulator’s commitment to creating an investor-friendly ecosystem.
Mumbai
October 16, 2024
