SEBI ANNOUNCES MAJOR REFORM TO SIMPLIFY FOREIGN PORTFOLIO INVESTOR APPROVALS, INTRODUCES T+0 SETTLEMENT

In a significant move aimed at streamlining the process for foreign investors and boosting market efficiency, the Securities and Exchange Board of India (SEBI) has announced a major reform to simplify the approval process for foreign portfolio investors (FPIs). Additionally, SEBI has introduced a T+0 settlement cycle for certain categories of securities, marking a paradigm shift in the Indian financial landscape.

The reform comes as part of SEBI’s ongoing efforts to enhance ease of doing business and attract more foreign investments into Indian markets. With the global investment landscape becoming increasingly competitive, such reforms are essential to ensure that India remains an attractive destination for foreign capital.

Under the new framework, SEBI has streamlined the approval process for FPIs by rationalizing the existing categories and requirements. This move is expected to reduce the administrative burden on foreign investors and expedite the approval process, thereby encouraging more FPI participation in Indian markets.

Furthermore, SEBI’s introduction of a T+0 settlement cycle for certain categories of securities is a landmark development that is poised to revolutionize the Indian capital markets. Traditionally, settlement cycles in India have followed a T+2 or T+3 timeline, meaning transactions are settled two or three days after the trade date. However, the adoption of a T+0 settlement cycle means that transactions will now be settled on the same day as the trade date, significantly reducing settlement risk and enhancing market liquidity.

The move to T+0 settlement is expected to have far-reaching implications for market participants, including brokers, investors, and regulators. By enabling faster settlement of trades, it reduces counterparty risk and frees up capital for market participants, leading to greater market efficiency and liquidity. Moreover, the shorter settlement cycle aligns Indian markets with global standards, making them more attractive to international investors.

SEBI’s announcement has been met with widespread acclaim from market participants and stakeholders, who view it as a progressive step towards modernizing India’s capital markets. The reform is expected to bolster investor confidence, attract foreign capital inflows, and stimulate greater trading activity in Indian securities.

However, it is essential to note that the implementation of these reforms will require careful planning and coordination among market participants, infrastructure providers, and regulators. SEBI must work closely with stakeholders to ensure a smooth transition to the new framework and address any challenges that may arise during the implementation phase.

Overall, SEBI’s decision to simplify the FPI approval process and introduce a T+0 settlement cycle reflects its commitment to fostering a conducive environment for investment and innovation in Indian markets. As India continues on its path of economic growth and development, such reforms play a crucial role in shaping the future trajectory of its capital markets and cementing its position as a leading global investment destination.