NISM-Series-VI: Depository Operations · Foreign Portfolio Investors (FPI)

FPI Registration Process and Role of DDP

Updated 11 October 2026 · Fact-checked

A foreign investor registers as an FPI by applying to a Designated Depository Participant (DDP), which is a SEBI-approved custodian or depository participant. The DDP checks KYC and eligibility documents, grants registration on SEBI's behalf, and handles PAN, fees and renewal. The investor then opens bank and demat accounts to trade.

Understand FPI Registration Process and Role of DDP

A Foreign Portfolio Investor (FPI) is a foreign entity that invests in Indian securities such as listed shares and debt. It does not take control of the company. To invest, it must first be registered under the SEBI (Foreign Portfolio Investors) Regulations, 2019.

SEBI does not deal with each applicant directly. It has authorised intermediaries called Designated Depository Participants (DDPs). A DDP is a custodian or depository participant approved by SEBI to do this work. The applicant submits the application and documents to a DDP of its choice.

The DDP acts as the first gate. It verifies the applicant's identity, its category and eligibility, and the KYC documents. It checks that the applicant is not a prohibited person. If all is in order, the DDP grants registration on behalf of SEBI. It also helps the applicant get a PAN and complete KYC.

Registration is not the end. The FPI then needs a custodian, a demat account and a bank account in India before it can trade. The DDP also looks after the registration life cycle: payment of fees, renewal, and reporting of changes in information. For the exam, remember who does what. SEBI frames the rules. The DDP registers. The custodian and depository hold and settle.

The FPI regime has categories based on risk, such as Category I and Category II. The category decides the level of documentation and scrutiny. Study that in the category topic. Here, focus on the process and the DDP's role.

Key formulas to remember

Who registers an FPI: Applicant → DDP → registration granted on behalf of SEBI; The application goes to a DDP, not directly to SEBI. The DDP is a SEBI-approved custodian or depository participant.
Governing regulation: SEBI (Foreign Portfolio Investors) Regulations, 2019; This is the current set of rules. It replaced the 2014 regulations.
Registration validity: Registration is permanent, subject to payment of fees every block of three years; Under the 2019 regulations, registration continues unless it is suspended, cancelled or surrendered. Fees are paid for each block of three years. Failure to pay can lead to the registration ceasing.
Pre-trade requirements: Registration + PAN + KYC + custodian + demat account + bank account → trading; Registration alone does not allow trading.
DDP duties: Verify documents → check eligibility and KYC → grant registration → collect fees → support renewal and changes; Use this as a checklist when an option describes the DDP role.

How to solve FPI Registration Process and Role of DDP questions

Most questions on this topic test who does what, what is needed and how long registration lasts. Use the same method each time.

1Read the question and mark the key word: DDP, KYC, PAN, fee, validity or renewal.
2Identify the actor. Ask whether the action belongs to SEBI, the DDP, the custodian or the depository.
3Recall the process order: application to DDP, document and KYC check, registration, PAN, then bank and demat accounts, then trading.
4For validity or fee questions, recall that registration is permanent and fees are paid per block of three years.
5Eliminate options that say the applicant applies directly to SEBI or that registration alone allows trading.
6Check absolute words such as always, only and never. Drop options that overstate the rule.
7If two options remain, pick the one that matches the regulation wording, not the common-sense guess.

Quickest way: Actor-and-order shortcut

When to use it: Use this when you have under a minute and the options look similar.

Fix the chain in your head: Applicant, DDP, SEBI rules, custodian, demat.
If the option says 'applies to SEBI directly', reject it.
If the option says 'registration is valid for a fixed short period only', be careful. The 2019 regime gives permanent registration with fee blocks.
If the option talks about trading, check that PAN, custodian and demat account are included.
Choose the option that gives the DDP the verification and granting role.

Common mistakes in FPI Registration Process and Role of DDP

Thinking the FPI applies directly to SEBI.
SEBI is the regulator, so students assume it handles registration.
Fix: Remember that SEBI has delegated this work to DDPs. The application goes to a DDP.
Believing registration must be renewed every year or every few years like a licence expiry.
Students mix up the old fixed-term regime with the current one.
Fix: Under the 2019 regulations, registration is permanent. What recurs is the fee for each block of three years.
Assuming a registered FPI can trade immediately.
Registration sounds like final permission.
Fix: The FPI still needs a custodian, a demat account and a bank account in India before it trades.
Confusing a DDP with any depository participant.
The names look alike.
Fix: A DDP is specifically a custodian or DP approved by SEBI to register FPIs. Not every DP is a DDP.
Ignoring KYC and PAN as part of the DDP process.
Students focus only on eligibility documents.
Fix: KYC and PAN are part of the onboarding. The DDP verifies KYC documents and the applicant must hold a PAN for investing.
Mixing up the Regulations year.
Both the 2014 and 2019 regulations appear in study material.
Fix: Write down 2019 as the current regulation and treat 2014 as the earlier one.

Worked examples

Example 1

Which of the following correctly describes how a foreign entity obtains FPI registration in India? (a) It applies directly to the Reserve Bank of India (b) It applies to a Designated Depository Participant, which grants registration on behalf of SEBI (c) It applies directly to a stock exchange (d) It applies to the Ministry of Finance

Show the solution

Identify the key word: registration process, so the actor matters.
Recall that SEBI has authorised DDPs to handle FPI applications.
The DDP verifies documents and KYC and grants registration on behalf of SEBI.
Option (a) is wrong because RBI is not the registering body here. Option (c) is wrong because exchanges do not register FPIs. Option (d) is wrong because the Ministry does not process applications.
Option (b) matches the process.

Answer: (b) It applies to a Designated Depository Participant, which grants registration on behalf of SEBI.

Example 2

An FPI has received its registration certificate through a DDP. Which statement is correct? (a) It can start trading at once because registration is complete (b) It must still arrange a custodian, a demat account and a bank account before trading (c) Its registration lapses automatically after one year (d) It must apply to SEBI again to get a PAN

Show the solution

Recall the sequence: registration, PAN and KYC, then accounts, then trading.
Option (a) skips the account requirements, so it is wrong.
Option (b) states the pre-trade requirements correctly.
Option (c) is wrong because registration is permanent, with fees payable per block of three years.
Option (d) is wrong because PAN is handled through the onboarding process, not by a fresh application to SEBI.

Answer: (b) It must still arrange a custodian, a demat account and a bank account before trading.

Exam tips

Expect questions that ask who grants registration. The safe answer is the DDP on behalf of SEBI.
Learn validity and fee wording together: permanent registration, fees per block of three years.
Watch for options that let an FPI trade right after registration. They skip the custodian and demat account.
Read for absolute words. A rule that sounds too rigid is often a trap.
In NISM-Series-VI there is negative marking of 25% of the marks for a question, so skip a question if you cannot narrow it to two options.

Practice questions from Foreign Portfolio Investors (FPI)

FPI Registration Process and Role of DDP: frequently asked questions

What is a Designated Depository Participant for FPIs?

A DDP is a custodian or depository participant approved by SEBI to register FPIs. It receives applications, verifies documents and KYC, and grants registration on behalf of SEBI. It also supports fee payment and changes later.

Does an FPI have to apply to SEBI directly?

No. The application is made to a DDP of the applicant's choice. SEBI sets the rules, and the DDP carries out the registration work.

Do FPIs need to renew registration?

Under the 2019 regulations, registration is permanent unless suspended, cancelled or surrendered. The FPI must pay the registration fee for each block of three years. Failure to pay can affect the registration.

Can an FPI trade right after registration?

No. It also needs a PAN, completed KYC, a custodian, a demat account and a bank account in India. Only then can it trade.