New Delhi: The government has notified the relaxed rules for investments in listed Indian stocks by residents outside the country, including foreign individuals and entities. The amended rules under the Foreign Exchange Management Act allow 'persons resident outside India' (PROIs) to invest through the portfolio investment scheme, which was earlier offered only to non-resident Indians and overseas citizens of India.
The Foreign Exchange Management (Non-debt Instruments) (Third Amendment) Rules, 2026, take immediate effect, as per a notification by the Department of Economic Affairs (DEA).
The decision was part of a raft of steps announced by the government on June 5 to reverse capital outflows and prop up a weakening rupee amid the West Asia war. The rupee closed at 95.08 against the dollar on Friday, gaining from 95.74 on June 4.
The notification doubles the investment limit for such investors. An individual PROI can now hold less than 10% of the total paid-up equity capital of a listed company, or the same percentage of the paid-up value of each series of debentures or preference shares or share warrants issued by it. The combined holding of all such individuals in a company has been lifted to 24% from 10%.
Prior government approval will be required if an individual PROI investment will result in the transfer of ownership or control of a listed company to entities or citizens of a country which shares land border with India, or where the beneficial owner of the investment is a citizen of such a nation. This is in sync with the government's foreign direct investment (FDI) policy.
"The decision seems to be taken with an eye on encouraging foreign investment into India, both FDI and FPI, at a time when there is a flight of capital," said Mayank Arora, associate partner (regulatory) at professional services firm Nangia Global.
Any individual PROI investment above the 10% prescribed limit in a company must be divested within five trading days of the breach, as per the notification.
If the PROI chooses not to divest the excess holding, then the entire investment will be considered as FDI, and the individual won't make further portfolio investment in that company.
The PROI, through the designated branch of the authorised dealer, must inform such breach to the depositories and the company concerned within seven trading days from the settlement date.
