India has introduced a significant policy shift allowing global retail investors to directly participate in its equity markets for the first time outside the traditional Non-Resident Indian (NRI) and Overseas Citizenship of India (OCI) framework.
The change has been enabled through an amendment to the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019, notified on June 12.
Under the revised framework, the earlier classification restricted to “non-resident Indian or overseas citizen of India” has been replaced with a broader category defined as “an individual person resident outside India.”
This expands direct access to Indian equities beyond the diaspora to a wider global investor base, representing a calibrated step toward capital account liberalisation.
Overseas individuals can now invest in equity instruments of listed Indian companies through recognised stock exchanges using authorised banking channels.
However, the framework includes strict safeguards to ensure portfolio flows do not translate into control or ownership changes.
An individual foreign investor is permitted to hold less than 10% equity in any listed company, while aggregate holdings by all such overseas individuals are capped at 24%.
These limits are designed to maintain the character of portfolio investment. If an investor breaches the 10% threshold, the excess must be reduced within five trading days; failing this, the entire holding is reclassified as foreign direct investment (FDI), bringing it under a stricter regulatory regime.
The rules also retain enhanced scrutiny for sensitive transactions.
Any investment resulting in transfer of ownership or control to entities from countries sharing a land border with India—or where the ultimate beneficial owner is based in such jurisdictions—will require prior government approval.
This continues the tighter oversight introduced in 2020.
The reform is expected to diversify India’s foreign investor base, which is currently dominated by institutional foreign portfolio investors.
It could enable smaller investments from global retail participants and high-net-worth individuals, aligning India with more open developed markets.
However, the success of the reform will depend on operational clarity regarding brokerage access, taxation, and banking procedures for overseas investors.
Overall, the move reflects India’s gradual and controlled approach to opening its capital markets while maintaining regulatory safeguards.
