SEBI, RBI Plan Easier Rules for Foreign Investors Amid Outflows

India's key financial regulators, the Securities and Exchange Board of India (SEBI) and the Reserve Bank of India (RBI) are set to ease rules for foreign investors in an effort to revive weak capital inflows, according to a Reuters report. The move comes amid a significant drop in foreign investments, with overseas investors pulling out a net $10 billion from Indian equities and bonds in 2025 so far. The outflows have intensified in recent months due to concerns over muted corporate earnings and rising US tariffs on Indian exports.

To address these concerns, SEBI and RBI are in advanced discussions to simplify the entry process for new foreign investors. Proposed changes include standardised and reduced documentation, faster registration timelines, and relaxed scrutiny for investors already regulated in their home countries. The registration period is expected to shrink from six months to just one to two months, aligning India with global norms.

A key area of reform will be harmonising RBI’s norms with SEBI’s more liberal documentation requirements, especially for low-risk, regulated pooled funds such as mutual and insurance funds. In 2019, SEBI had eased norms for public retail funds, but RBI is yet to implement similar relaxations. Currently, RBI mandates a risk-based approach requiring proof of identity and source of funds, which has been flagged as a hurdle. The new framework would allow foreign investors to open bank accounts in India with fewer regulatory roadblocks.

Earlier this month, a delegation of investors from six countries met with officials from SEBI, RBI, stock exchanges, and the Finance Ministry to discuss the proposed reforms. Over the past five months, Indian regulators have engaged with more than 200 global asset managers across Asia, Europe, and the U.S. to make Indian markets more accessible.