The Reserve Bank of India has issued A.P. (DIR Series) Circular No. 14 (RBI/2026-27/114) dated June 15, 2026, addressed to all Category-I Authorised Dealer (AD) banks, liberalising the framework for Foreign Portfolio Investment under Schedule III of the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019.
Background
Schedule III of the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019, notified by the Central Government on October 17, 2019, governs investment by persons resident outside India in equity instruments of listed Indian companies on recognised stock exchanges. Until now, this route was available only to Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs).
What Has Changed
The Rules have been amended through the Foreign Exchange Management (Non-Debt Instruments) (Third Amendment) Rules, 2026, notified vide S.O. 3030(E) dated June 12, 2026. This amendment extends the Schedule III investment route to all individual persons resident outside India, removing the earlier restriction to NRIs and OCIs alone. Investment limits under the route have also been enhanced.
Corresponding reporting amendments have been made under the Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019, notified vide Notification No. FEMA 395(4)/2026-RB dated June 13, 2026.
Operational Framework for AD Category-I Banks
The circular sets out the following operational requirements for AD Category-I banks facilitating such investments:
Repatriable INR Accounts: AD Category-I banks may open a repatriable INR account for an individual person resident outside India, in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016, to facilitate investment under Schedule III.
Reporting and Monitoring: Reporting of transactions and monitoring of investment limits prescribed under the Rules shall be carried out in the same manner as is presently followed for investments by NRIs and OCIs.
Reclassification to FDI: Where an individual's investment under Schedule III breaches the prescribed investment limits, or otherwise requires reclassification from Foreign Portfolio Investment to Foreign Direct Investment, such reclassification shall be undertaken in accordance with the framework prescribed by the Reserve Bank for Foreign Portfolio Investors under A.P. (DIR Series) Circular No. 19 dated November 11, 2024.
Compliance Obligations: AD Category-I banks must ensure compliance with the Rules, the Regulations, and applicable SEBI regulations while facilitating such investments. Banks are required to put in place appropriate systems and procedures, and may obtain necessary documents and disclosures from investors to ensure regulatory compliance.
Effective Date
The directions contained in the circular have come into force with immediate effect. AD Category-I banks have been directed to bring the contents of the circular to the notice of their customers and constituents concerned.
Statutory Basis
The circular has been issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999, and is without prejudice to any other permissions or approvals required under any other law.
Key Takeaway
This amendment marks a significant widening of access to India's listed equity markets for foreign individual investors, moving beyond the NRI/OCI-only framework that has applied since the Rules were first notified in 2019. AD Category-I banks, custodians, and compliance teams should update onboarding and account-opening processes to accommodate the expanded eligible investor base, while continuing to apply the existing NRI/OCI reporting and monitoring architecture and the FPI reclassification framework where limits are breached.
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