NISM Series VI · Chapter 12: Foreign Portfolio Investors(FPI)

L1 · Foundation

Foreign Portfolio Investors — registration, categories and the DDP

How the FPI regime replaced FIIs, sub-accounts and QFIs with one class of investor, the eligibility conditions for registration, the two categories, the Common Application Form, and the eligibility and role of the Designated Depository Participant.

11 min read · Worth 2% of the paper · Written from pages 208–213 of the official NISM workbook · Updated 17 September 2026

Where this chapter sits

Chapter 12 carries 2% of the paper — one of the two lightest chapters. It is entirely recall, and it rewards learning three things precisely: who cannot be an FPI, what falls in Category I versus Category II, and the DDP's eligibility conditions.

12.1 How the regime came about

SEBI had issued the notification viz. FPI Regulations, 2014 on January 7, 2014 to put in place a framework for registration and procedures with regard to foreign investors who propose to make portfolio investment in India, and issued the operational guidelines for Designated Depository Participants (DDPs) in respect of FPI regime.

FPI regime commenced in India from June 1, 2014.

Further, SEBI has introduced SEBI (Foreign Portfolio Investors) Regulations, 2019 on September 23, 2019. SEBI has also issued detailed Operational Guidelines for FPIs, DDPs and eligible Foreign Investors on November 5, 2019 towards implementation of FPI Regulations 2019. Accordingly, the previous SEBI (FPI) Regulations, 2014 and Operational Guidelines have been repealed.

What the regime achieved: FPI regime offers a single route to various class of foreign investors viz., FIIs, Sub Accounts & QFIs under portfolio investment scheme to converge into one class of foreign investor viz., Foreign Portfolio Investor (FPI).

Three earlier categories folded into one. That consolidation is the point of the whole framework.

And the registration is delegated: DDPs will carry out the necessary due diligence and shall grant registration to FPI and issue registration certificate to the FPI.

No person shall buy, sell or otherwise deal in securities as a foreign portfolio investor unless it has obtained a certificate granted by the designated depository participant on behalf of the Board.

Note the words "on behalf of the Board". The DDP is not registering the FPI in its own right — it is acting for SEBI.

An application for the grant of certificate as foreign portfolio investor shall be made to the designated depository participant in SEBI prescribed forms and shall be accompanied by the fee as specified in the regulations.

The Common Application Form

SEBI has introduced Common Application Form (CAF) which enables FPI applicants to apply for the purpose of:

(a) registration of FPIs with SEBI.
(b) allotment of PAN.
(c) carrying out of KYC for opening of Bank & Demat Account.

Three things in one form. Registration, tax number and account opening.

How it is filed: NSDL developed the CAF on NSDL FPI Portal viz., FPI Monitor (www.fpi.nsdl.co.in) to be filled by the applicant in an electronic manner. The NSDL FPI portal enables applicants to fill and submit the CAF in an electronic manner to its DDP.

Post due diligence, DDP grants registration to FPI on the NSDL FPI portal. Upon registration, FPI Registration certificate is generated by NSDL FPI portal.

And on the PAN: NSDL has integrated the FPI portal with Income Tax Department (ITD) through Protean eGov Technologies Limited for allotment of PAN for the FPI.

12.2 Eligibility to be an FPI

A DDP shall consider an application for grant of certificate of registration as a FPI if the applicant satisfies the following conditions:

Who is excluded

a. the applicant is not a resident Indian.
b. the applicant is not a non-resident Indian or an overseas citizen of India.

Resident Indians, NRIs and OCIs cannot themselves be FPIs. That is the most examinable point in the chapter, and it is a common trap.

But they may be constituents

c. non-resident Indians or overseas citizens of India or resident Indian individuals may be constituents of the applicant provided they meet the conditions specified by the Board from time to time.

Being a constituent (an investor in the fund) is different from being the FPI.

Resident Indians other than individuals may also be constituents, in two situations:

First — the section 9A fund manager route:

(i) such resident Indian, other than individuals, is an eligible fund manager of the applicant, as provided under sub-section (4) of section 9A of the Income Tax Act, 1961.
(ii) the applicant is an eligible investment fund as provided under sub-section (3) of section 9A of the Income Tax Act, 1961 which has been granted approval under the Income Tax Rules, 1962.

Second — the IFSC AIF route:

(i) the applicant is an Alternative Investment Fund setup in the International Financial Services Centres and regulated by the International Financial Services Centres Authority.
(ii) such resident Indian, other than individuals, is a Sponsor or Manager of the applicant.
(iii) the contribution of such resident Indian, other than individuals, shall be up to —

Fund category	Contribution cap
Category I or Category II Alternative Investment Fund	2.5% of the corpus of the applicant or US $ 7,50,000 (whichever is lower)
Category III Alternative Investment Fund	5% of the corpus of the applicant or US $ 1.5 million (whichever is lower)

Note both are "whichever is lower" — the percentage and the dollar figure both cap the contribution.

The jurisdiction test

d. the applicant is a resident of the country whose securities market regulator is a signatory to the International Organization of Securities Commission's Multilateral Memorandum of Understanding (Appendix A Signatories) or a signatory to the bilateral Memorandum of Understanding with the Board.

Two relaxations:

Provided that an applicant being Government or Government related investor shall be considered as eligible for registration, if such applicant is a resident in the country as may be approved by the Government of India.

The applicant being a bank is a resident of a country whose central bank is a member of Bank for International Settlements: Provided that a central bank applicant need not be a member of Bank for International Settlements.

A commercial bank needs its country's central bank to be a BIS member; a central bank applying in its own right does not.

The sanctions and FATF test

e. the applicant or its underlying investors contributing twenty-five per cent or more in the corpus of the applicant or identified on the basis of control, shall not be the person(s) mentioned in the Sanctions List notified from time to time by the United Nations Security Council and is not a resident in the country identified in the public statement of Financial Action Task Force as (i) a jurisdiction having a strategic Anti-Money Laundering or Combating the Financing of Terrorism deficiencies to which counter measures apply; or (ii) a jurisdiction that has not made sufficient progress in addressing the deficiencies or has not committed to an action plan developed with the Financial Action Task Force to address the deficiencies.

In plain words, the DDP checks two things here. First, is the applicant, or anyone behind it, on the UN sanctions list? "Anyone behind it" means an investor with twenty-five per cent or more of the corpus, or one who controls it. Second, is the applicant based in a country that FATF has flagged for weak money-laundering controls? A yes to either question means no registration.

The look-through threshold is twenty-five per cent, or control.

The remaining tests

f. the applicant is a fit and proper person based on the criteria specified in Schedule II of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008.
g. any other criteria specified by the Board from time to time.

And an IFSC carve-out: provided that clause (a), (d) and (e) shall not apply to an applicant incorporated or established in an International Financial Services Centre.

Three conditions waived for IFSC applicants — the resident-Indian bar, the jurisdiction test and the sanctions/FATF test.

The two categories

Category I

"Category I foreign portfolio investor" which shall include —

(i) Government and Government related investors such as central banks, sovereign wealth funds, international or multilateral organizations or agencies including entities controlled or at least 75% directly or indirectly owned by such Government and Government related investor(s).
(ii) Pension funds and university funds.
(iii) Appropriately regulated entities such as insurance or reinsurance entities, banks, asset management companies, investment managers, investment advisors, portfolio managers, broker dealers and swap dealers.
(iv) Entities from the Financial Action Task Force member countries or from any country specified by the Central Government by an order or by way of an agreement or treaty with other sovereign Governments, which are —
appropriately regulated funds.
unregulated funds whose investment manager is appropriately regulated and registered as a Category I foreign portfolio investor — provided that the investment manager undertakes the responsibility of all the acts of commission or omission of such unregulated fund.
university related endowments of such universities that have been in existence for more than five years.
(v) An entity (A) whose investment manager is from the Financial Action Task Force member country and such an investment manager is registered as a Category I foreign portfolio investor; or (B) which is at least seventy-five per cent owned, directly or indirectly by another entity, eligible under sub-clause (ii), (iii) and (iv)... and such an eligible entity is from a Financial Action Task Force member country — again with the investment manager or eligible entity undertak[ing] the responsibility of all the acts of commission or omission.

Put simply, Category I is for money that is either sovereign or well regulated. Governments, central banks, pension funds and regulated firms qualify on their own. A fund that is not regulated can still get in, but only by leaning on a regulated manager or owner. That manager or owner then answers for the fund's acts.

Two 75% figures appear in Category I — for government-owned entities and for entities owned by another eligible entity. And university related endowments need the university to have been in existence for more than five years.

Category II

"Category II foreign portfolio investor" shall include all the investors not eligible under Category I foreign portfolio investors such as —

(i) appropriately regulated funds not eligible as Category-I foreign portfolio investor.
(ii) endowments and foundations.
(iii) charitable organisations.
(iv) corporate bodies.
(v) family offices.
(vi) Individuals.
(vii) appropriately regulated entities investing on behalf of their client, as per conditions specified by the Board from time to time.
(viii) Unregulated funds in the form of limited partnership and trusts.

Category II is the residual class — "all the investors not eligible under Category I".

And an IFSC deeming provision: an applicant incorporated or established in an International Financial Services Centre shall be deemed to be appropriately regulated.

The quick test: a sovereign wealth fund, central bank, pension fund, university fund or appropriately regulated entity is Category I. An individual, family office, charitable organisation, corporate body or unregulated fund is Category II.

Eligibility of a Designated Depository Participant

SEBI shall not consider an application for the grant of approval as designated depository participant unless the applicant satisfies the following conditions:

(a) the applicant is a registered DDP registered with SEBI.
(b) the applicant is a custodian of securities registered with SEBI.
(c) the applicant is an Authorised Dealer Category-1 bank authorised by the Reserve Bank of India.
(d) the applicant has multinational presence either through its branches or through agency relationships with overseas intermediaries regulated in their respective home jurisdictions.
(e) the applicant has systems and procedures to comply with the requirements of Financial Action Task Force Standards, Prevention of Money Laundering Act, 2002, Rules prescribed thereunder and the circulars issued from time to time by the Board.
(f) the applicant is a fit and proper person based on the criteria specified in Schedule II of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008.
(g) any other criteria specified by SEBI from time to time.

Note the combination required — a DDP must simultaneously be a registered participant, a registered custodian, an AD Category-1 bank and hold multinational presence. Very few entities can satisfy all four.

The alternative route: SEBI may also consider an application from an entity, regulated in India, for grant of approval to act as designated depository participant, if it is satisfied that it has sufficient experience in providing custodial services and the grant of such approval is in the interest of the development of the securities market.

However, such entity shall be registered with the SEBI as a participant and custodian and shall have tie up with Authorised Dealer Category-1 bank.

Not a bank itself, but tied up with one — that is the difference between the main route and the alternative.

Engagement of the DDP

Each FPI shall engage a DDP to avail its services for obtaining a certificate of registration as foreign portfolio investor and at all times the DDP and the Custodian of the FPI shall be the same entity.

One entity, both roles, at all times. The DDP that registers the FPI must also be its custodian — which explains why being a registered custodian of securities is one of the DDP eligibility conditions.

Think of it like this

Three doors became one — FIIs, sub-accounts and QFIs are now all FPIs

A government office that once had separate counters for three kinds of applicant, each with its own forms and rules, eventually merges them into a single window. Nothing about the applicants changed; the queue did.

FPI regime offers a single route to various class of foreign investors viz., FIIs, Sub Accounts & QFIs under portfolio investment scheme to converge into one class of foreign investor viz., Foreign Portfolio Investor (FPI).

The dates: SEBI had issued the notification viz. FPI Regulations, 2014 on January 7, 2014, and FPI regime commenced in India from June 1, 2014. Then SEBI has introduced SEBI (Foreign Portfolio Investors) Regulations, 2019 on September 23, 2019, with detailed Operational Guidelines... on November 5, 2019, upon which the previous SEBI (FPI) Regulations, 2014 and Operational Guidelines have been repealed.

The single window extends to the paperwork too. SEBI has introduced Common Application Form (CAF) which enables FPI applicants to apply for the purpose of (a) registration of FPIs with SEBI (b) allotment of PAN and (c) carrying out of KYC for opening of Bank & Demat Account.

Three separate approvals — a securities registration, a tax number and bank and demat accounts — obtained through one filing.

And it is filed electronically: NSDL developed the CAF on NSDL FPI Portal viz., FPI Monitor (www.fpi.nsdl.co.in) to be filled by the applicant in an electronic manner. Post due diligence, DDP grants registration to FPI on the NSDL FPI portal. Upon registration, FPI Registration certificate is generated by NSDL FPI portal.

Even the PAN comes through the same pipe: NSDL has integrated the FPI portal with Income Tax Department (ITD) through Protean eGov Technologies Limited for allotment of PAN for the FPI.

A resident Indian cannot be an FPI — but can be an investor in one

You cannot enter a competition reserved for visitors from another town. You can, however, put money behind a visiting team. Participating in the entity and being the entity are different things, and the FPI rules turn on that difference.

The bar is stated twice, to cover every case:

a. the applicant is not a resident Indian; b. the applicant is not a non-resident Indian or an overseas citizen of India;

So a resident Indian, an NRI and an OCI are all excluded from being an FPI.

But the very next clause opens the door as an investor: non-resident Indians or overseas citizens of India or resident Indian individuals may be constituents of the applicant provided they meet the conditions specified by the Board from time to time.

And resident Indians other than individuals may be constituents in two defined situations — as an eligible fund manager of the applicant, as provided under sub-section (4) of section 9A of the Income Tax Act, 1961 where the fund is an eligible investment fund, or as a Sponsor or Manager of an Alternative Investment Fund setup in the International Financial Services Centres.

In the IFSC case the contribution is capped, and both limbs bite: 2.5% of the corpus of the applicant or US $ 7,50,000 (whichever is lower) for a Category I or Category II AIF, and 5% of the corpus of the applicant or US $ 1.5 million (whichever is lower) for a Category III AIF.

And note that IFSC applicants get a broader relaxation still: clause (a), (d) and (e) shall not apply to an applicant incorporated or established in an International Financial Services Centre — the resident-Indian bar, the jurisdiction test and the sanctions/FATF test all fall away.

Category I is the establishment; Category II is everyone else

Some visitors arrive with a diplomatic passport, some with an ordinary one. The first group is trusted because of who issued their papers; the second is not distrusted, merely ordinary.

The FPI categories work the same way, and Category II is defined simply as the remainder: "Category II foreign portfolio investor" shall include all the investors not eligible under Category I foreign portfolio investors.

Category I is where sovereign and regulated money sits: Government and Government related investors such as central banks, sovereign wealth funds, international or multilateral organizations or agencies · pension funds and university funds · appropriately regulated entities such as insurance or reinsurance entities, banks, asset management companies, investment managers, investment advisors, portfolio managers, broker dealers and swap dealers.

Plus certain FATF-country funds — appropriately regulated funds, unregulated funds whose investment manager is appropriately regulated and registered as a Category I foreign portfolio investor, and university related endowments of such universities that have been in existence for more than five years.

Category II collects the rest: appropriately regulated funds not eligible as Category-I · endowments and foundations · charitable organisations · corporate bodies · family offices · Individuals · appropriately regulated entities investing on behalf of their client · unregulated funds in the form of limited partnership and trusts.

The exam-ready test: a sovereign wealth fund or central bank is Category I; an individual or family office is Category II.

Two 75% thresholds sit inside Category I — entities at least 75% directly or indirectly owned by such Government and Government related investor(s), and entities at least seventy-five per cent owned, directly or indirectly by another entity that is itself eligible.

And where an unregulated fund rides on its manager's status, the manager carries the risk: the investment manager undertakes the responsibility of all the acts of commission or omission of such unregulated fund.

A DDP has to be four things at once, and then be the custodian too

A person authorised to certify passports at a bank counter has to be a bank officer, of a certain seniority, at a branch of a certain kind. Stacking the requirements is how the system keeps the function in trustworthy hands.

A DDP is registering foreign investors on behalf of the Board, so the stacking is deliberate:

(a) the applicant is a registered DDP registered with SEBI (b) the applicant is a custodian of securities registered with SEBI (c) the applicant is an Authorised Dealer Category-1 bank authorised by the Reserve Bank of India (d) the applicant has multinational presence either through its branches or through agency relationships with overseas intermediaries regulated in their respective home jurisdictions (e) the applicant has systems and procedures to comply with the requirements of Financial Action Task Force Standards, Prevention of Money Laundering Act, 2002 (f) the applicant is a fit and proper person based on the criteria specified in Schedule II of the SEBI (Intermediaries) Regulations, 2008

Participant, custodian, AD-1 bank, and multinational reach — all four simultaneously.

There is one alternative route for a non-bank: SEBI may also consider an application from an entity, regulated in India... if it is satisfied that it has sufficient experience in providing custodial services and the grant of such approval is in the interest of the development of the securities market. However, such entity shall be registered with the SEBI as a participant and custodian and shall have tie up with Authorised Dealer Category-1 bank.

Tied up with a bank rather than being one — that is the only concession.

And the reason condition (b) exists becomes clear at the end of the chapter: each FPI shall engage a DDP... and at all times the DDP and the Custodian of the FPI shall be the same entity. The DDP will inevitably be the custodian, so it must already be registered as one.

The 25% look-through: sanctions apply to who is really behind the fund

Checking only the name on the cheque tells you very little. If a sanctioned person owns a quarter of the company writing it, the cheque is still his money in substance.

The FPI eligibility rules therefore look past the applicant to its investors.

The applicant or its underlying investors contributing twenty-five per cent or more in the corpus of the applicant or identified on the basis of control, shall not be the person(s) mentioned in the Sanctions List notified from time to time by the United Nations Security Council.

Note the two triggers — twenty-five per cent or more in the corpus, or identified on the basis of control. A person with control needs no percentage at all.

The same test covers jurisdiction risk: the applicant must not [be] a resident in the country identified in the public statement of Financial Action Task Force as (i) a jurisdiction having a strategic Anti-Money Laundering or Combating the Financing of Terrorism deficiencies to which counter measures apply; or (ii) a jurisdiction that has not made sufficient progress in addressing the deficiencies or has not committed to an action plan developed with the Financial Action Task Force.

A separate jurisdiction test applies to the applicant itself: it must be a resident of the country whose securities market regulator is a signatory to the International Organization of Securities Commission's Multilateral Memorandum of Understanding (Appendix A Signatories) or a signatory to the bilateral Memorandum of Understanding with the Board.

With two exceptions. A Government or Government related investor qualifies if such applicant is a resident in the country as may be approved by the Government of India, and a bank must be a resident of a country whose central bank is a member of Bank for International Settlements — though a central bank applicant need not be a member of Bank for International Settlements.

And the DDP's own systems must match this seriousness: it needs systems and procedures to comply with the requirements of Financial Action Task Force Standards, Prevention of Money Laundering Act, 2002.

Key terms in this chapter

Authorised Dealer Category-1 bank: An RBI-authorised bank; being one is a condition of DDP approval on the main route, while an experienced Indian custodian taking the alternative route must instead tie up with such a bank.
Category I FPI: Government and government-related investors, pension and university funds, appropriately regulated entities, and specified FATF-country funds — including unregulated funds whose manager is itself a Category I FPI.
Category II FPI: The residual class — all investors not eligible under Category I, including endowments, foundations, charitable organisations, corporate bodies, family offices, individuals and unregulated limited partnerships and trusts.
Common Application Form (CAF): A single form covering registration of the FPI with SEBI, allotment of PAN, and KYC for opening bank and demat accounts, filed electronically on the NSDL FPI Portal (FPI Monitor).
Constituent: An investor in an FPI, as distinct from the FPI itself. NRIs, OCIs and resident Indian individuals may be constituents even though they cannot be FPIs.
Designated Depository Participant (DDP): The entity that carries out due diligence and grants FPI registration on behalf of SEBI, issuing the registration certificate. It must at all times also be the custodian of the FPI.
Foreign Portfolio Investor (FPI): The single class of foreign investor into which FIIs, sub-accounts and QFIs converged under the FPI regime, which commenced in India from June 1, 2014.
FPI Monitor: The NSDL FPI Portal (www.fpi.nsdl.co.in) on which the Common Application Form is filed electronically, registration is granted by the DDP, and the FPI registration certificate is generated.
IFSC relaxation: Clauses (a), (d) and (e) of the FPI eligibility conditions — the resident Indian bar, the jurisdiction test and the sanctions/FATF test — do not apply to an applicant incorporated or established in an International Financial Services Centre.
IOSCO MMoU test: The requirement that an FPI applicant be resident in a country whose securities market regulator is an Appendix A signatory to IOSCO's Multilateral Memorandum of Understanding, or has a bilateral MoU with SEBI.
Sanctions look-through: The screening of the applicant and any underlying investor contributing 25% or more of the corpus, or identified on the basis of control, against the UN Security Council Sanctions List and FATF-flagged jurisdictions.
Section 9A eligible fund manager: A resident Indian non-individual permitted to be a constituent of an FPI where it is the eligible fund manager under section 9A(4) of the Income Tax Act, 1961 and the applicant is an eligible investment fund under section 9A(3).

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Original explanatory writing based on the official NISM workbook for Series VI, which is published and copyrighted by NISM. Check figures against the current edition at nism.ac.in.

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