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

An FPI client asks a DP whether it can hold its Indian securities in physical certificate form after registration. What is the correct position?

FPIs must hold their Indian securities in dematerialised form through a depository account with a custodian, with limited exceptions such as certain unlisted instruments. They cannot freely choose physical certificates, and they are not restricted to government bonds.

  1. AYes, FPIs may hold securities in physical form at their discretion
  2. BYes, but only if the securities are debt instruments
  3. CNo, FPIs can hold and transfer securities only in dematerialised form, except for unlisted instruments where permittedCorrect
  4. DNo, FPIs may not hold securities in any form other than government bonds

Explanation

FPIs are required to hold securities in dematerialised form with a depository through a custodian, with limited exceptions such as certain unlisted holdings. Option 1 and 2 ignore this rule, and option 4 wrongly restricts FPIs to government bonds.

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