A Foreign Portfolio Investor (FPI) is a regulatory concept and a type of non-resident investor, which can be an entity or an individual, that invests in Indian securities like stocks, bonds, and mutual funds. The FPI regime was established to replace the earlier fragmented approach, primarily the Foreign Institutional Investor (FII) framework, to align India's foreign investment nomenclature with international practice. The intent to adopt this internationally accepted definition was announced in the Union Budget 2013-14 on February 28, 2013.
The mechanism is governed by the SEBI (Foreign Portfolio Investors) Regulations, 2019, which repealed the SEBI (Foreign Portfolio Investors) Regulations, 2014 on September 23, 2019. To invest, a non-resident must register with the Securities and Exchange Board of India (SEBI) through a Designated Depository Participant (DDP). FPIs are classified into two categories: Category I for low-risk, highly regulated entities like central banks and sovereign wealth funds, and Category II for other institutional investors. A crucial provision is the distinction from Foreign Direct Investment (FDI): if an FPI's investment in a single Indian company exceeds 10%, the entire holding is reclassified as FDI.
The FPI framework connects to the Foreign Exchange Management Act, 1999 (FEMA) and the Prevention of Money Laundering Act, 2002. The 2019 regulations aimed to ease the registration process and lessen compliance requirements. Recent changes include the introduction of the SWAGAT-FI framework for trusted foreign investors and relaxations for GS-FPIs (FPIs investing exclusively in Government Securities). Furthermore, in July 2026, SEBI notified a shift to a Rupee-denominated fee structure for FPI registration, replacing the US dollar-denominated fee.