SEBI To Consider Easing FPI Settlement Norms With Netting Proposal

The Securities and Exchange Board of India (SEBI) is likely to consider a proposal to ease settlement norms for foreign portfolio investors (FPIs) by allowing netting for same-day cash market trades, according to a report by PTI.

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The proposal will be taken up at SEBI’s board meeting scheduled for March 24, 2026. If approved, FPIs would be allowed to offset purchase and sale transactions executed on the same day, instead of settling each trade separately under the current system.

Proposed Change In Settlement Mechanism

FPIs at present have to settle their equity trades on a gross basis. This means that every purchase transaction is required to be funded independently, even if a corresponding sale transaction is executed on the same day. The proposed framework provides for a net settlement mechanism, where the net payable amount is to be met after adjusting the positions of the buy and sell transactions.

According to PTI, this change is aimed at improving operational efficiency and reducing the cost of funding for FPIs. It is also expected to help minimise foreign exchange-related costs arising from timing mismatches between inflows and outflows.

Background And Rationale

The move follows concerns that the existing gross settlement system increases funding requirements for at least one additional day, thereby raising transaction costs for foreign investors. The proposed changes are intended to align settlement practices with evolving market requirements and global standards.

Broader Regulatory Agenda

The SEBI board is also expected to review other regulatory proposals during the meeting. These include changes to governance norms for market intermediaries and a review of the “fit and proper person” criteria.

As per PTI, the regulator is considering removing the reference to initiation of winding-up proceedings as a disqualification, ensuring that only final orders are taken into account while assessing eligibility.

In addition, SEBI may formalise provisions related to the right to a hearing, with the aim of improving procedural clarity in regulatory actions.

Other Items Under Consideration

The board is also likely to examine proposals related to ease of doing business for real estate investment trusts (REITs) and infrastructure investment trusts (InvITs). Further, a report to be presented by a high-level panel on conflict of interest and transparency is expected to be discussed.

This would be the fifth meeting of the board, which would be chaired by SEBI Chairman Tuhin Kanta Pandey after he took over the office on March 1, 2025.

If approved, the changes to the FPI settlement norms would signal a change in the manner in which foreign investors transact in the Indian stock markets.