Govt takes slew of measures to attract stable long-term foreign capital flows

The Finance Ministry on Friday said it has taken a series of measures to broaden and simplify foreign investment in Indian equities and government securities, to attract stable long-term foreign capital flows Finance and Corporate Affairs Minister Nirmala Sitharaman in the Union Budget FY 2026-27 had announced that individual Persons Resident Outside India (PROI) will be permitted to invest in equity instruments of listed Indian companies through the Portfolio Investment Scheme, a route previously limited to NRIs and OCIs. The investment limit will be increased for an individual PROI under this scheme from 5 per cent to 10 per cent in any company, with an overall investment limit for all individual PROIs to 24 per cent, from the current 10 per cent, the statement from Ministry of Finance said. To implement the change, the Department of Economic Affairs (DEA) is notifying the Foreign Exchange Management (Non-Debt Instruments) (Third Amendment) Rules, 2026, the statement added. The notification will facilitate a more proactive mobilisation of foreign portfolio capital by leveraging the existing onboarding systems already in place for NRI/OCI investors. Simplified onboarding and reduced compliance requirements would further enhance ease of doing business, while attracting a broader base of relatively stable individual foreign investors. This will also support greater and more stable foreign inflows into Indian equity markets, the statement noted. The government aims to deepen FPI participation in government securities by expanding the Fully Accessible Route to include new issuances in tenors of 15, 30 and 40 years and Sovereign Green Bonds in the tenors of FAR-eligible securities. Further, for FPI investments under General Route, it will remove the three restrictions, viz. short-term investment limit, concentration limit and the security-wise limit for investments by Foreign Portfolio Investors (FPIs) in G-secs, while retaining the overall quantitative investment limit of 6 per cent of the outstanding stock of the Central Government securities and 2 per cent of the State Government securities (SGSs). These measures will help in development of a smooth yield curve, and attract stable systematic inflow of long-term, patient foreign capital, including long-term investors such as pension funds, insurance companies, and sovereign wealth funds. The move will also boost foreign exchange inflows for the country, the ministry said. The government will also exempt interest and capital gains on investments by FPIs in government securities from income tax, which is effective from April 1, 2026. The reforms collectively aim to reduce operational complexities, simplify market access, and provide a more seamless investment experience comparable with leading international financial markets.