Govt Makes It Easier for Foreign Investors to Enter Indian Markets with New Capital Market Reforms

In a significant step aimed at strengthening India’s position as a leading global investment destination, the Ministry of Finance has announced a series of reforms to deepen the Government Securities (G Sec) market and make equity investments more attractive for Foreign Portfolio Investors (FPIs).

The reforms, aligned with the broader vision of the Government of India, focus on improving capital market efficiency, simplifying rules, and attracting stable long term foreign inflows.

A key highlight is the liberalisation of investment norms for individual Persons Resident Outside India (PROIs) under the Foreign Exchange Management (Non Debt Instrument) Rules, 2019. These investors will now be allowed to invest in equity shares of listed Indian companies through the Portfolio Investment Scheme , a facility earlier restricted to NRIs and OCIs.

The investment limit per company has been increased from 5 percent to 10 percent, while the overall ceiling for such investors has been raised from 10 percent to 24 percent. The move is expected to expand the foreign investor base and improve market liquidity and stability.

In parallel, reforms have been introduced to deepen participation of FPIs in Government Securities . The government has expanded the Fully Accessible Route (FAR) to include new issuances of 15, 30, and 40 year bonds, along with Sovereign Green Bonds.

Restrictions such as short term investment limits, concentration limits, and security wise caps under the general route have been removed. However, the overall limits remain at 6 percent of Central Government Securities and 2 percent of State Government Securities (SGSs).

These steps are expected to help build a smoother yield curve and attract long term institutional investors such as pension funds, insurance companies, and sovereign wealth funds, strengthening financial market depth and stability.

Further boosting investor confidence, the government has also decided to provide tax exemption on interest and capital gains for FPIs investing in Government Securities, effective from April 1, 2026. This aligns India’s tax regime with several major global markets.

The Department of Economic Affairs said these measures will reduce compliance burden, simplify access, and improve India’s attractiveness as a global investment destination.

Overall, the reforms aim to deepen India’s bond and equity markets, attract long term patient capital, and reinforce confidence in one of the world’s fastest growing major economies.