SEBI eases KYC norms for foreign investors, extends review cycle up to 8 years

Category I includes investors such as government-related entities, appropriately regulated funds and certain institutional investors that are considered to have a relatively lower risk profile. Category II covers a wider range of investors, including appropriately regulated entities and other eligible funds and institutions that do not qualify for Category I. Under the revised rules announced on Friday, the KYC review period will be extended from one year to two years and from three years to eight years, depending on the category and risk profile of the investor.

The changes will come into effect from December 1, 2026. At present, FPIs have to undergo periodic KYC reviews every one or three years, depending on their jurisdiction, category and regulatory status. With the new framework, several categories of foreign investors will have to complete the exercise less frequently. For high-risk Category I FPIs registered under a specific regulatory provision, the review period has been extended to eight years.

Other high-risk Category I investors and high-risk Category II investors will have to undergo reviews once every two years. For non-high-risk investors, the review period will be eight years for Category I FPIs. Among Category II investors, regulated entities will also get an eight-year review cycle, while other investors will continue to undergo reviews every two years. The 10-year KYC review period for SWAGAT-FI investors will remain unchanged.

Existing relaxations for FPIs investing only in government securities will also continue. In another relief, SEBI has done away with the requirement for foreign investors to separately confirm whether details submitted earlier have changed at the time of renewing their registration. Earlier, FPIs had to inform their designated depository participants (DDPs) about changes in information or submit a declaration stating that there were no changes.

However, investors will still have to pay the applicable registration continuation fee at least 15 days before their existing registration expires. Recently, at an event, SEBI Chairman Tuhin Kanta Pandey had said, "We are also examining longer KYC review cycles for eligible FPIs. This will reduce repetitive compliance while preserving material-change reporting and safeguards." He had also said that SEBI would continue simplifying the entire investment journey for foreign investors.

In this regard, SEBI is engaging with the Reserve Bank of India (RBI) to harmonise SWIFT-based certification of KYC documents for FPI bank accounts. SEBI said the changes were part of its efforts to remove repetitive compliance requirements, reduce the burden on foreign investors and improve the ease of doing business.