SEBI on Thursday approved an overhaul of portfolio management rules, a new mutual-fund investment route with a Rs 25 lakh minimum ticket and measures to widen foreign participation in Indian markets. The decisions were taken at the market regulator’s 215th board meeting in Mumbai on September 24.
Wider market access
To deepen commodity-market liquidity, foreign portfolio investors (FPIs) will be allowed to trade in non-agricultural index derivatives, irrespective of whether the underlying contracts are cash-settled and non-cash-settled non-agricultural commodity derivatives, according to SEBI.
Participation in contracts involving physical settlement will require FPIs to exit before delivery obligations arise. Positions must be closed before the tender period, three days before expiry. FPIs cannot increase positions from T-3.
Before trading, FPIs must enter into agreements with trading members or trading-cum-clearing members specifying how positions will be handled. These must provide for squaring off positions or transferring residual open positions to the member before the tender period, at the exchange-declared closing or daily settlement price on the transfer date. Such transfers will be treated as trades and attract applicable statutory levies.
More investment options
The proposed Portfolio Managers Regulations, 2026, will replace the 2020 framework. Portfolio managers will be allowed to invest in IPOs and primary debt issuances, while discretionary portfolios can allocate up to 10% of client assets to investment-grade, non-convertible, unlisted debt with client consent. Investment in foreign securities will also be enabled, subject to applicable foreign-exchange rules.
SEBI approved the Portfolio Managers Route for Investing in Mutual Fund units (PRIM), covering direct plans, including ETFs, index funds and specialised investment funds. The minimum investment will be Rs 25 lakh, with fixed management fees capped at 1% of client assets. Performance-based fees will also be permitted.
REIT and debt reforms
The board cleared enabling provisions for depository receipts on units of real estate investment trusts and infrastructure investment trusts. Initially envisaged for listing in India’s International Financial Services Centre, these instruments will be open to foreign investors, including NRIs. Detailed rules will follow separately.
For certain REIT and InvIT decisions, the approval threshold will shift to 75% of votes cast from 75% of outstanding units.
SEBI approved removing the requirement that first-time debt issuers list their outstanding unlisted non-convertible debt when entering the listed market. Only prospective issuances will require listing.
Investor access and safeguards
Other changes include manager-led investor accreditation and deemed accreditation for non-residents. Individuals can qualify through securities-market exposure of at least Rs 5 crore.
The board also expanded bullion-vault regulation and raised vault managers’ net-worth requirement to Rs 75 crore from Rs 50 crore. Investor protections preventing fund managers from using fund assets for their own losses or expenses will extend to all alternative investment funds.