Finance Minister Nirmala Sitharaman announced in the Union Budget 2026–27 that India will formally open its capital markets to persons resident outside India (PROIs). The Finance Bill 2026–27 gives legislative backing to this announcement by amending provisions under the Income-tax Act, 2025 and aligning them with a broader liberalisation of the Foreign Exchange Management Act (FEMA) framework.

What existed earlier: NRI investments under a restrictive regime

It is important to note that non-resident Indians (NRIs) were not completely barred from investing in Indian securities earlier. However, their access was limited to the portfolio investment scheme (PIS) under FEMA.

This framework involved higher compliance and reporting requirements, mandatory routing through designated bank branches, and tight investment caps—5% at an individual level and 10% at an aggregate NRI level in a listed company. These constraints meant that while access existed, participation remained fragmented.

What changes now: From NRIs to PROIs

The Finance Bill 2026–27 marks a shift from this narrow framework by referring to persons resident outside India (PROIs) rather than only NRIs. This broader categorisation allows the government to widen the overseas investor base and reduce procedural hurdles under FEMA.

The reforms align portfolio investments by PROIs more closely with FPI-style market access, indicating a move away from approval-driven regulation towards a more principle-based, market-oriented approach.

Higher investment limits

The individual investment limit has been increased from 5% to 10%, while the aggregate overseas holding limit has been raised from 10% to 24% in listed companies.

These changes enable overseas investors to take more meaningful positions in Indian equities, improve price discovery, and reduce the risk of forced sell-downs due to technical breaches of limits.

Speaking after the Budget, Prime Minister Narendra Modi said India is emerging as a “trusted democratic partner and a reliable, quality supplier for the global economy.”

Industry reactions

Industry experts have largely welcomed the move. Xerxes Antia, Partner at BTG Advaya, said the proposed comprehensive review of the FEMA (Non-Debt Instruments) Rules could bring greater clarity on beneficial ownership, investment structures, and repatriation norms, further incentivising foreign investment in priority sectors.

BDO India's Anish Shah said, “relaxations in the FEMA (Non-Debt Instruments) Rules shall make the Indian market more accessible to non-resident individuals, enabling capital inflows and boosting liquidity in Indian markets.”

Dhruv Chopra of Dewan P N Chopra & Co., said that increasing portfolio investment limits for PROIs and simplifying access to listed securities advances ease of doing business and enhances India’s appeal to overseas investors.

Vinay Jain, founder and managing director of GADOTT said, "for manufacturing and retail-led businesses, easier access to overseas capital can support steady expansion, better technology adoption, and long-term capacity building. At a broader level, such reforms strengthen India’s position as a reliable and attractive destination for global investors, while encouraging long-term, growth-oriented investments rather than short-term capital flows.”