FPIs Propose Margin Netting and Centralised Documentation to Sebi at Global Fintech Fest

Foreign portfolio investors (FPIs) have urged the Securities and Exchange Board of India (Sebi) to adopt margin netting and establish a centralised documentation process to streamline operations and reduce forex costs. The recommendations emerged during a panel discussion at the Global Fintech Fest, which featured Sebi officials and leading industry participants.

FPIs Call for Margin Netting to Reduce Forex Costs

FPIs highlighted the need to net margin requirements, aiming to cut currency inflows and outflows and lower associated costs. “A lot has been done for FPIs, like introducing a common contract note. Now, the next step could be net margin. Can we actually reduce inflow and outflow of currency? Because there is a huge cost,” said Kaku Nakhate, CEO – India, Bank of America.

Centralised Documentation and Standardisation for Greater Efficiency

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In addition to margin netting, participants proposed revisions to the securities lending and borrowing framework, a streamlined KYC process, and the creation of a centralised repository for custodian and FPI documentation. Simon Williams, MD and Asia-Pacific head of government affairs at BlackRock, emphasised that custodians storing and accessing FPI documents through a secure central repository would significantly improve operational efficiency.

Janak Dalal, head of securities services at Deutsche Bank India, called for greater standardisation and transparency in FPI procedures, including a real-time tracker for applications. Such measures, he noted, would help attract more investors while giving them better operational control.

Sebi’s Response and Ongoing Initiatives

Sebi officials welcomed the proposals but noted the need to balance risk management with operational efficiency. Aparna Thyagarajan, Sebi’s chief general manager, highlighted that while margin netting could be considered, the regulator must evaluate potential risks, banking comfort levels, and price-volume implications. Currently, the equity cash market follows a T+1 settlement cycle, where each trade is settled individually, adding to operational complexity.

In recent months, Sebi has introduced initiatives to ease FPI onboarding, such as Swagat-FI, a single-window platform, and simplified registration for investors focused on Indian government bonds. The regulator is also working on enhancing centralised access via the India Market Access Portal.

Conclusion

FPIs’ proposals for margin netting, centralised documentation, and streamlined processes reflect a growing emphasis on operational efficiency and cost reduction. While Sebi is open to reviewing these measures, a careful balance between risk management and investor facilitation will be key to implementation.