The Government of India has announced major reforms to attract more foreign investment and deepen the government securities (G-Sec) market. The measures are aimed at making India a more competitive and accessible destination for global investors.
Under the new rules, individual Persons Resident Outside India (PROIs) will now be allowed to invest in shares of listed Indian companies through the Portfolio Investment Scheme. Earlier, this route was available only to NRIs and OCIs.
The investment limit for a single PROI has been increased from 5% to 10% in any listed company. The combined investment limit for all PROIs has also been raised from 10% to 24%, which could help bring more stable foreign capital into Indian equity markets.
To boost foreign participation in government bonds, India has expanded the Fully Accessible Route (FAR) to include new 15 year, 30 year and 40 year government securities, along with Sovereign Green Bonds issued in eligible tenors.
The government has also removed three key restrictions for FPIs investing in government securities under the General Route: the short term investment limit, concentration limit and security wise limit. However, the overall investment cap remains unchanged at 6% of outstanding Central Government securities and 2% of State Government securities.
In a major tax reform, FPIs will no longer pay income tax on interest earned or capital gains from investments in Government Securities. The exemption is effective from April 1, 2026. The same tax benefit has also been extended to the Bank for International Settlements (BIS).
The government expects these reforms to attract long term investors such as pension funds, insurance companies and sovereign wealth funds, increase foreign capital inflows, improve liquidity in bond markets and expand global participation in India’s financial markets.
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