SEBI introduces new framework for net settlement of funds for foreign portfolio investors
Why it matters
Previously, FPI transactions were often settled on a gross basis across different segments, leading to higher capital lock-ins and operational complexities. The new SEBI framework allows for the offsetting of pay-in and pay-out obligations of FPIs, effectively permitting 'netting' of fund requirements. This is expected to significantly lower the cost of trading for institutional investors and reduce the systemic risk associated with large-scale fund transfers during peak settlement periods. The move aligns Indian market practices with global standards, making the domestic market more attractive to international capital.
The framework is specifically designed for the cash market segment but interacts with other regulatory requirements such as the T+1 settlement cycle. By allowing net settlement, SEBI is addressing a long-standing demand from global custodians and institutional investors for improved capital efficiency. The implementation of this framework requires coordination between stock exchanges, clearing corporations, and depository participants to ensure that the risk management systems are robust enough to handle netted obligations without compromising market integrity.
- Effective Date: Issued April 24, 2026
- Target Entity: Foreign Portfolio Investors (FPIs)
- Primary Goal: Operational efficiency and reduction of capital requirements
- Market Segment: Cash Market
Glossary
Net Settlement: A settlement mechanism where the total value of buy and sell transactions is offset against each other, and only the remaining net balance is transferred.