SEBI Proposes Netting Of Funds For Foreign Portfolio Investors In Cash Market

The Securities and Exchange Board of India (SEBI) has released a consultation paper proposing a key reform in the cash market segment. The regulator suggests permitting netting of funds for outright purchase and sale transactions executed by FPIs. This would allow investors to offset their buy and sell obligations, thereby reducing the total funds required for settlement.  

The proposal is part of SEBI’s broader effort to simplify market operations, improve liquidity, and attract greater foreign investment into Indian equities. By aligning with global best practices, the reform is expected to enhance India’s competitiveness as an investment destination.  

Key highlights from the announcement include  

• SEBI proposes netting of funds for FPIs in cash market transactions.  
• Only outright buy and sell trades will be eligible for netting.  
• Measure aims to reduce settlement fund obligations and improve efficiency.  
• Consultation paper invites stakeholder feedback before final implementation.  
• Proposal aligns with global standards and supports ease of doing business.  
• Industry experts view the move as a boost to FPI participation and market depth.  

If implemented, the reform could significantly lower transaction costs for FPIs and streamline fund flows, reinforcing India’s appeal in global capital markets.  

Sources: Reuters, SEBI Consultation Paper, Business Standard