Sebi doubles FPI KYC review period to 2 years, extends longer cycle to 8 years

The Securities and Exchange Board of India (Sebi) has doubled the know-your-customer (KYC) review period for foreign portfolio investors (FPIs) from one year to two years and extended the longer review cycle from three years to eight years as part of its efforts to ease compliance requirements and improve the ease of doing business. 

The revised framework will come into effect from December 1, 2026. However, the existing KYC review periodicity for SWAGAT-FI FPIs, at 10 years, will remain unchanged. The current relaxations available to government securities-focused FPIs (GS-FPIs) will also continue. 

In another major change, the regulator has discontinued the requirement for FPIs to separately intimate changes, if any, in information submitted earlier at the time of continuation of their registration. 

Sebi said the changes were aimed at rationalising compliance requirements, reducing repetitive procedures and easing the compliance burden on foreign investors. 

Depositories, custodians and designated depository participants (DDPs) have been directed to make the necessary changes to their systems and processes to implement the revised provisions and inform the concerned FPIs. The circular has been issued under Section 11(1) of the Sebi Act, 1992, read with Regulation 44 of the Sebi (Foreign Portfolio Investors) Regulations, 2019. 

Sebi imposes ₹1 crore penalty on CDSL for compliance lapses 

Separately, Sebi has imposed a penalty of ₹1 crore on Central Depository Services (India) Ltd (CDSL) for multiple compliance lapses, including failure to communicate reasons for rejecting pledge requests and shortcomings in disaster recovery operations. 

CDSL has been directed to pay the penalty within 45 days, failing which recovery proceedings may be initiated. In its 102-page order, Sebi said CDSL had violated several regulatory requirements during FY2023-24, following an inspection of its operations.  

The violations included failure to communicate the reasons for rejecting pledge requests to the depository participants (DPs) of both the pledgor and the pledgee. The regulator also flagged non-compliance with prescribed procedures for handling Client Unpaid Securities Accounts. 

Other shortcomings included inadequate measures to prevent unauthorised data transmission and deficiencies in disaster recovery drills. The penalty follows Sebi's examination of CDSL's compliance with regulatory requirements governing depository operations during FY23-24.