By Manoj Purohit
India stands as the world’s fourth-largest economy by GDP and among the fastest-growing economies globally. Considering the performance of the Indian economy, in the past few years, it has consistently enticed significant foreign investment.
Foreign investors, overseen by Sebi, predominantly engage in listed markets across various sectors. Despite prevailing geopolitical tensions worldwide, India’s capital markets have sustained a robust growth trajectory, reinforcing its appeal as a favoured investment destination.
PROI landscape in India prior to Finance Bill, 2026
In recent years, the Indian equity markets have demonstrated notable resilience and growth. With capital markets delivering multi-fold returns over a five-year horizon, Indian markets have significantly outperformed several global equity indices. This sustained outperformance has enhanced India’s attractiveness as an investment destination, leading to heightened interest from foreign investors.
Foreign investment in the Indian capital markets is primarily undertaken by foreign direct investors (FDIs), foreign portfolio investors (FPIs), and persons resident outside India (PROIs). The present regulations permit FPIs to invests up to 10% of total paid-up equity share capital of an Indian company on an individual basis, while the aggregate FPI investment is capped at 24% of the firm’s total paid-up capital, unless a higher limit is approved in accordance with applicable laws.
As per the provisions of the Foreign Exchange Management Act, 1999 (FEMA), a Person Resident Outside India (PROI) refers to a person who is not resident in India. In substance, this includes individuals residing outside India for purposes such as employment, education, or for an uncertain period.
The definition also encompasses Non-Resident Indians (NRIs), Overseas Citizens of India (OCIs), and other individuals who do not satisfy the residency criteria prescribed under FEMA. The regulations permit,a PROI to invest up to 5% of the total paid-up capital of an Indian company on an individual basis, with the aggregate investment by PROIs capped at 10% of the total paid-up capital of the Indian Company.
Consequently, a trend has been observed wherein several PROIs channel their investments through the FPI route,to avail the higher investment limits permitted under the FPI framework or are sometimes unable to access the Indian capital market due to the investment restrictions and fear of falling on the other side of the law due to restricted limits.
Proposed amendment
As per the Finance Bill, 2026, it is proposed that the permissible investment limits applicable to PROIs shall be aligned with those applicable to FPIs. Accordingly, the individual investment limit will be enhanced to 10% of total paid-up capital, while the aggregate limit has been enhanced to 24% of the total paid-up capital, up from the existing limits of 5% and 10% for the individual and aggregate limits, respectively.
The rationale for such an amendment is to augment foreign capital inflows into India. Additionally, it reflects a policy intent to attract investments from PROIs who, although residing and incurring expenditure outside India, maintain economic ties with India and are potential long-term contributors to domestic capital formation.
Currently, the quantum of Overseas Indians as per data published by the external affairs ministry stands at 35,421,987, with countries such as Australia, US, and Canada contributing the maximum share. This large number of Indians acts as potential investors for the Indian capital market. They understand the pulse of the nation and overall investment sentiment and are keen to access the Indian capital market. The Asset Under Custody (AUC) of NRIs investing in India has gone down from Rs 19,182 crore in 2024 to Rs 15,971 crore as on December 31, 2025.
The proposed amendment will surely provide an impetus for attracting such non-residents towards the capital market and increase overall investment volumes. From a broader perspective, this move can be construed as a stepping stone for creating a stream of foreign inflows in parallel to FPI inflows, which will ensure substantial and continuous capital to Indian companies and increase the foreign currency reserves.
(The author is partner & leader of financial services, tax and regulatory advisory, at BDO India. Pranav Sakhadeo also contributed to the column)
Disclaimer: The views expressed are the author’s own and do not reflect the official policy or position of Financial Express.