SEBI Plans to Relax Rules, Paving Way for Greater NRI Investment in Indian Stocks

Tuhin Kanta Pandey, the chairman of the Securities and Exchange Board of India (SEBI), announced on 11 October that the market watchdog is simplifying regulatory procedures to facilitate NRI investments in Indian equities markets. In order to eliminate the need for NRIs to return to India in order to fulfil know-your-customer (KYC) standards, the regulator is attempting to streamline the process.

At a function hosted by the Bombay Stock Exchange Brokers' Forum on October 11, Pandey stated that SEBI has not yet created a simple and safe KYC access system for NRIs to enable their involvement in the securities market. This will be the regulating body's first priority.

SEBI Collaborating with RBI and UIDAI

Pandey stated that SEBI is working with the Unique Identification Authority of India (UIDAI) and the Reserve Bank of India (RBI) to develop a system that would allow NRIs to complete their KYC verification over video conversations rather than needing to return home. Notably, there are more than 3.5 crore non-resident Indians (NRIs) worldwide, and India is the biggest beneficiary of remittances worldwide, with $135 billion received in FY25.

According to Pandey, SEBI's "immediate goal" is to make the FPI registration process quick and easy by making it entirely portal-based, because the agency previously agreed in September to establish a single window for trusted foreign portfolio investors (FPIs) with less stringent compliance standards. In order to put it into effect, he continued, SEBI is already consulting its stakeholders.

When it comes to enabling registration, SEBI wants to be among the best in the world. To enable digital registration, SEBI, RBI, and the Income Tax Department would need to collaborate, according to Pandey, who characterised the project as a "process issue" rather than one resulting from hazards. Speaking to the broker community, Pandey stated that SEBI will finish revising broker laws by the end of December.

Commenting on the development, Rohit R. Chauhan, Founder, Ingood stated, "The Securities and Exchange Board of India (SEBI) is preparing a sweeping set of reforms aimed at making it easier for Non-Resident Indians (NRIs) to invest in Indian stocks and bonds. The move is part of SEBI’s broader effort to attract long-term diaspora capital and deepen India’s financial markets."

"But the reform agenda goes further. SEBI has recently relaxed norms in the derivatives market, removed cumbersome disclosures, and is now considering raising foreign individual investment limits, from 5% to 10% in listed companies, and the overall foreign cap to 24%. It also plans to ease norms for investors in government securities from early 2026. Together, these steps mark a major policy shift, positioning India as a more open, digitally enabled, and globally integrated investment destination for its diaspora," he added.

SEBI to Device Framework to Prevent Cybercrime

According to Pandey, SEBI will speak with market infrastructure organisations before issuing instructions on keeping an "air gap" in order to improve cybersecurity. He went on to say that SEBI has put in place a redundancy model for clearing corporations, which enables operations to continue without interruption in the event that one clearing corporation fails, and that market infrastructure institutions are being put to the test through live disaster recovery drills.

"As with stockbrokers, we are also looking at implementing a safety net at a depository participant in the event of an outage," Pandey stated. He added that the data warehouse system has been redesigned to create new role-based alerts to detect fraudulent trades in bulk deals and identify pump-and-dump trends. He also mentioned that SEBI is moving from reactive supervision to predictive oversight in the surveillance space.

As per Pandey, high-frequency and algorithmic trading have grown significantly in recent years and now make up a sizable portion of volumes in the derivatives and equity markets.