SEBI May Introduce ‘Automatic Window’ for FPIs to Curb Equity Outflows

The Securities and Exchange Board of India (SEBI) is considering a major reform to attract and retain foreign capital by easing entry for overseas investors. At its upcoming board meeting on September 12, the regulator is expected to discuss the creation of an “automatic window” for foreign portfolio investors (FPIs), people familiar with the matter told Economic Times.

The move is designed to simplify registration and compliance requirements, particularly for large sovereign wealth and pension funds. Officials describe the initiative as similar to a “diplomatic channel at airports,” offering fast-track access to global institutions investing in Indian markets.

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If implemented, the automatic window will cover nearly 70% of the 11,913 registered FPIs in India. This includes some of the world’s biggest investors, such as GIC of Singapore, Abu Dhabi Investment Authority (ADIA), Norway’s Government Pension Fund, Canada Pension Plan Investment Board (CPPIB), as well as public retail funds like Goldman Sachs and Morgan Stanley.

Together, these institutions manage assets worth ₹81 lakh crore in Indian markets. Simplifying entry is expected to enhance ease of doing business and strengthen India’s position as a preferred investment destination.

Addressing Capital Outflows

The proposal comes amid heavy foreign withdrawals. Since July, FPIs have pulled out more than ₹83,000 crore from Indian equities due to global volatility and tariff tensions. The regulator hopes that streamlining access will help restore investor confidence and stem further outflows.

Speaking at a recent event, SEBI whole-time member Ananth Narayan said: “If overseas investors obtain a kind of ‘diplomatic passport,’ it would make it easier for them to invest in our markets.”

Narayan and SEBI chairman Tuhin Kanta Pandey recently met over 250 FPIs in Hong Kong and Singapore to better understand their concerns and the hurdles they face when investing in India.

How the Automatic Window Will Work

Currently, FPI entry involves multiple routes depending on investor type, investment vehicle and target company. Each pathway requires separate documentation and compliance, often making the process complex and repetitive.

Under the new framework, FPIs that are at least 75% government-owned or regulated in their home countries will be eligible for the automatic window. This mechanism will unify registration, cut duplication, and reduce paperwork, giving large global investors faster and more predictable access. Existing entry routes will remain, but the streamlined system is expected to drastically improve efficiency.

Other Reforms Under Consideration

Apart from the FPI window, SEBI’s board will also deliberate on a proposal to reserve a dedicated quota for domestic insurance companies and pension funds in the anchor book of initial public offerings (IPOs).

At present, these institutions participate as anchor investors but do not have a separate allocation like domestic mutual funds. Introducing a quota could deepen India’s IPO market, attract long-term capital and broaden institutional participation.

Conclusion

By introducing an automatic window for FPIs, SEBI aims to make Indian markets more accessible and reduce foreign investor outflows. Together with additional reforms for domestic institutions, these measures are expected to boost liquidity, enhance investor confidence and support India’s capital markets in a volatile global environment.