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

FPI Regulatory Framework and SEBI FPI Regulations 2019

Updated 11 October 2026 · Fact-checked

A Foreign Portfolio Investor (FPI) is a non-resident investor registered under the SEBI (Foreign Portfolio Investors) Regulations, 2019 to invest in Indian securities. FPIs replaced FIIs and sub-accounts. SEBI registers and supervises them, RBI governs the foreign exchange side, and the government sets overall policy. Solve questions by identifying the regulator and the rule.

Understand FPI Regulatory Framework and SEBI FPI Regulations

Before 2014, foreign institutions invested in India as Foreign Institutional Investors (FIIs), along with sub-accounts and Qualified Foreign Investors (QFIs). Each had separate rules. This made the system complex.

SEBI merged these routes into one class called Foreign Portfolio Investor (FPI). The first FPI Regulations came in 2014. They were replaced by the SEBI (Foreign Portfolio Investors) Regulations, 2019, which is the current framework. The key idea is that FII, sub-account and QFI were brought under one common FPI regime.

FPI means portfolio investment: buying listed shares, debt and similar securities without seeking control of the company. It is different from Foreign Direct Investment (FDI), which involves a lasting interest and usually a significant stake. Investment limits and conditions exist to keep the two apart.

Three authorities matter. SEBI makes the FPI Regulations, registers FPIs through Designated Depository Participants (DDPs) and supervises them. RBI controls the foreign exchange side under FEMA, including the rules for investing and repatriating funds. The Government of India sets policy and the overall foreign investment framework, for example through the Ministry of Finance and the sectoral and FDI policy.

FPIs hold securities in dematerialised form. They use a custodian and a DP, so this topic links directly to depository operations. Registration is granted by the DDP on behalf of SEBI after it verifies eligibility, KYC and fit-and-proper criteria under the Regulations. The registration is permanent unless suspended, cancelled or surrendered, subject to the applicable fee conditions.

Key formulas to remember

Current governing regulation: SEBI (Foreign Portfolio Investors) Regulations, 2019; Replaced the 2014 FPI Regulations. Do not confuse it with the old FII Regulations of 1995.
Evolution: FII + Sub-accounts + QFI → FPI; One common class of foreign portfolio investor under a single regime.
Regulator roles: SEBI = registration and supervision; RBI = foreign exchange (FEMA); Government = policy; Match the function to the authority in MCQs.
Registration channel: Application → DDP → registration on behalf of SEBI; The investor applies through a Designated Depository Participant.
FPI vs FDI: FPI = portfolio investment without control; FDI = lasting interest and control; Use this to reject options that treat the two as the same.

How to solve FPI Regulatory Framework and SEBI FPI Regulations questions

Most questions test who does what and what changed from FII to FPI. Use this method.

1Read the question stem and underline the key word: regulator, regulation, term, or comparison.
2Decide whether it is about history (FII, sub-account, QFI) or the current regime (2019 Regulations).
3If it asks about authority, map the function: registration or supervision to SEBI, foreign exchange to RBI, policy to Government.
4If it asks about registration, think DDP acting on behalf of SEBI.
5Eliminate options that mention FDI features such as control or lasting interest.
6Eliminate options with old regulation names or the wrong year when the question asks for the current one.
7Pick the option that fits all conditions in the stem, then check for words like 'not' or 'except'.

Quickest way: Three-regulator match

When to use it: Use when the option list names SEBI, RBI or the Government and you have under a minute.

Ask: is this about registering or supervising the investor? Choose SEBI.
Ask: is this about foreign exchange, remittance or FEMA? Choose RBI.
Ask: is this about overall policy or sectoral caps? Choose Government.
If the question says FII replaced, choose FPI and the 2019 Regulations.

Common mistakes in FPI Regulatory Framework and SEBI FPI Regulations

Saying FIIs still exist as a separate category under current rules.
The term FII is still used in news and older books.
Fix: Remember that FII, sub-accounts and QFIs were merged into the single FPI category.
Choosing RBI as the registering authority for FPIs.
RBI is linked to foreign exchange, so students overextend its role.
Fix: Registration is under SEBI, through a DDP. RBI handles the FEMA side.
Quoting the 2014 Regulations as the current framework.
The 2014 rules were the first FPI rules, so they stick in memory.
Fix: The current framework is the SEBI (FPI) Regulations, 2019.
Treating FPI and FDI as the same.
Both are foreign investment into India.
Fix: FPI is portfolio investment without control. FDI is a lasting interest with control or significant stake.
Thinking the FPI applies directly to SEBI without any intermediary.
Students focus on SEBI as the regulator.
Fix: Remember the DDP acts on behalf of SEBI to grant registration.

Worked examples

Example 1

Which of the following correctly describes the evolution of foreign portfolio investment regulation in India? (a) FPIs were created to replace the DP system (b) FIIs, sub-accounts and QFIs were brought under one FPI category (c) RBI introduced FPIs as a separate class of FDI (d) FPIs are regulated only under FEMA

Show the solution

Identify the topic: evolution from FII to FPI.
Recall that SEBI merged FII, sub-accounts and QFI into one class.
Check (a): FPIs have nothing to do with replacing DPs. Reject.
Check (c): FPI is portfolio investment, not FDI, and SEBI created the class. Reject.
Check (d): FPIs are also regulated by SEBI, not only FEMA. Reject.
Option (b) matches the merger.

Answer: (b) FIIs, sub-accounts and QFIs were brought under one FPI category.

Example 2

An FPI wants to know which authority registers it and which authority governs the foreign exchange rules for its remittances. Identify them.

Show the solution

Registration and supervision of FPIs belong to SEBI.
Registration is applied for through a Designated Depository Participant (DDP) acting on behalf of SEBI.
Foreign exchange rules for inflow and repatriation fall under FEMA, administered by RBI.
So the two functions are split between two regulators.

Answer: SEBI registers the FPI (through a DDP), and RBI governs foreign exchange aspects under FEMA.

Exam tips

Expect direct recall: name of the regulation, year, and which authority does what.
Watch for options that swap SEBI and RBI roles. This is the most common trap.
Remember the order: FII regime, then 2014 FPI Regulations, then 2019 Regulations as current.
Link FPI questions to depository operations: FPIs hold securities in demat form through custodians and DPs.
Read 'not' and 'except' carefully. NISM-Series-VI carries negative marking of 25% of the marks assigned to a question.

Practice questions from Foreign Portfolio Investors (FPI)

FPI Regulatory Framework and SEBI FPI Regulations: frequently asked questions

What is the difference between FII and FPI?

FII was the older category of foreign institutional investors, with separate sub-accounts and QFIs. FPI is the unified category created by SEBI that replaced them. The current rules are the SEBI (FPI) Regulations, 2019.

Who regulates foreign portfolio investors in India?

SEBI registers and supervises FPIs. RBI regulates the foreign exchange aspects under FEMA. The Government of India sets the broader policy on foreign investment.

Which regulations govern FPIs now?

The SEBI (Foreign Portfolio Investors) Regulations, 2019 govern FPIs. They replaced the 2014 FPI Regulations.

How does an FPI get registered?

The investor applies through a Designated Depository Participant (DDP). The DDP grants registration on behalf of SEBI after verifying eligibility, KYC and fit-and-proper criteria under the Regulations.