Foreign Portfolio Investors that hold only Government Securities through the General Route no longer have to disclose investor group details to their custodian — a compliance step that, until this week, applied to every such FPI outside the Fully Accessible Route. SEBI's circular dated September 7, 2026 removes that route-specific condition, closing a gap that had existed since the exemption was first carved out a year earlier.
Quick answer
SEBI, through Circular No. HO/(485)2026-AFD-POD2/I/20296/2026 dated September 7, 2026, has amended its Master Circular for Foreign Portfolio Investors, Designated Depository Participants and Eligible Foreign Investors dated May 30, 2024. FPIs investing only in Government Securities no longer need to furnish investor group details, regardless of whether they invest through the Fully Accessible Route or the General Route. The earlier version of this exemption, inserted in September 2025, covered Fully Accessible Route investors only. The change takes effect immediately.
What changed?
The amendment touches a single clause in the Master Circular, but it widens that clause's reach considerably.
"FPIs that invest exclusively in Government Securities under Fully Accessible Route shall not be required to furnish investor group details."
"FPIs investing only in Government Securities shall not be required to furnish investor group details."
Why this matters
This amendment did not originate at SEBI. Its immediate trigger is a Reserve Bank of India circular dated June 5, 2026 RBI Circular dated June 5, 2026 – FPI Concentration Limit Withdrawal, which withdrew the requirement for FPIs investing in Government Securities through the General Route to comply with the prescribed concentration limit. In practice, concentration limits are what investor group details are used for: multiple FPIs under common ownership or control are aggregated into a single "investor group" so a regulator can check whether, together, they have exceeded a permissible holding. SEBI's own circular confirms the link directly, stating that once the concentration limit no longer applied to this category, "the requirement for identification of investor group by an FPI investing only in Government Securities is no longer relevant and is therefore being removed."
The Fully Accessible Route (FAR) and the General Route are the two channels through which FPIs invest in eligible Government Securities. Market participants generally understand FAR investments as not carrying the aggregate investment ceilings that apply to General Route investments, which may explain why the original 2025 exemption was written narrowly around FAR investors — though neither SEBI circular states this reasoning explicitly. This circular removes that route-based distinction, but only for the specific purpose of the investor-group-details requirement — it does not otherwise merge the two routes.
Who is affected?
FPIs investing only in Government Securities through the General Route.
FPIs investing only in Government Securities through the Fully Accessible Route — exempt since September 2025.
FPIs holding Government Securities alongside equities, corporate bonds or other instruments.
Depositories, Custodians and Designated Depository Participants, who must update their systems.
Detailed analysis
The 2025 exemption and its route-based limit
SEBI first addressed this issue through a circular dated September 10, 2025 SEBI Circular dated September 10, 2025 – FPI Investor Group Exemption, which amended the Master Circular for Foreign Portfolio Investors, Designated Depository Participants and Eligible Foreign Investors (No. SEBI/HO/AFD/AFD-PoD-2/P/CIR/P/2024/70, dated May 30, 2024) SEBI Master Circular for FPIs, DDPs and Eligible Foreign Investors – May 2024. That amendment inserted a sub-para under Para 1 of Part A exempting FPIs that invested exclusively in Government Securities under the Fully Accessible Route from furnishing investor group details.
The RBI trigger: withdrawal of the concentration limit
The Reserve Bank of India, through its circular dated June 5, 2026, withdrew the requirement for FPIs investing in Government Securities through the General Route to comply with the prescribed concentration limit. SEBI's circular states this directly: with the concentration limit gone for that category, "the requirement for identification of investor group by an FPI investing only in Government Securities is no longer relevant and is therefore being removed."
The amended clause
SEBI has accordingly modified the sub-para under Para 1, Part A of the Master Circular to read: "FPIs investing only in Government Securities shall not be required to furnish investor group details." The words "under Fully Accessible Route" have been dropped, which is the entire operative change in this circular.
Directions to depositories, custodians and DDPs
Depositories, Custodians and Designated Depository Participants have been advised to make the necessary changes in their systems to give effect to the amendment. The circular does not itemize specific system changes, leaving the implementation method to each institution.
Legal basis
SEBI has issued the circular in exercise of its powers under Section 11(1) of the Securities and Exchange Board of India Act, 1992, read with Regulations 22(1), 22(3), 22(5) and 44 of the SEBI (Foreign Portfolio Investors) Regulations, 2019 SEBI (Foreign Portfolio Investors) Regulations, 2019.
The circular took effect immediately on the date of issue, September 7, 2026. No compliance deadline, transition window or grandfathering clause has been prescribed; the earlier, narrower exemption is treated as superseded from that date for the newly covered category of FPIs.
Practical implications
For custodians and DDPs, this is a reclassification exercise rather than a new obligation: identify existing General Route FPI clients that invest solely in Government Securities, and stop requesting investor group details from that group going forward. FPIs themselves do not need to file anything or apply for the exemption — it attaches automatically to the category of investor rather than case-by-case. FPIs with a mixed portfolio should not assume the exemption extends to them; the clause is limited to investors holding only Government Securities, and adding other instruments would bring the investor-group requirement back into play. Compliance teams tracking the broader FPI framework should also note that this is a consequential amendment — it exists only because of RBI's separate action in June 2026, and further SEBI clarifications may follow if RBI adjusts the concentration-limit or route framework again.
Compliance checklist
Frequently asked questions
What does SEBI's September 2026 circular change for FPIs?
It removes the "Fully Accessible Route" condition from an existing exemption, so FPIs investing only in Government Securities no longer need to furnish investor group details, regardless of the route used.
Which FPIs newly qualify for this exemption?
FPIs that invest only in Government Securities through the General Route now qualify. They were not covered by the earlier, narrower exemption.
Does the exemption still apply to Fully Accessible Route investors?
Yes. FPIs investing only in Government Securities under the Fully Accessible Route have been exempt from furnishing investor group details since September 10, 2025, and remain exempt.
What was the position before this circular?
Before September 7, 2026, only FPIs investing exclusively in Government Securities under the Fully Accessible Route were exempt from furnishing investor group details.
Why did SEBI make this change now?
The Reserve Bank of India, through a circular dated June 5, 2026, withdrew the requirement for FPIs investing in Government Securities through the General Route to comply with the prescribed concentration limit. That made investor group identification unnecessary for this category of FPI, prompting SEBI to widen the exemption.
When does the circular take effect?
The circular takes effect immediately, from September 7, 2026. No transition period or later compliance date is specified.
Do FPIs holding both Government Securities and other instruments qualify?
No. The exemption applies only to FPIs investing "only" in Government Securities. An FPI holding equities, corporate bonds or other instruments alongside Government Securities remains subject to the investor group requirement.
What must depositories, custodians and DDPs do?
SEBI has directed Depositories, Custodians and Designated Depository Participants to make the necessary changes in their systems to give effect to the widened exemption.
Under what legal authority has SEBI issued this circular?
SEBI issued the circular under Section 11(1) of the Securities and Exchange Board of India Act, 1992, read with Regulations 22(1), 22(3), 22(5) and 44 of the SEBI (Foreign Portfolio Investors) Regulations, 2019.
Where can I read the original circular?
The circular is published on SEBI's website, www.sebi.gov.in, under the "Legal – Circulars" section.
CorpLawUpdates analysis
This is a compact but well-sequenced example of cross-regulator coordination: RBI adjusts a prudential requirement, and SEBI follows within roughly three months to remove a related disclosure burden that no longer serves a purpose. For custodians managing large FPI books, housekeeping of this kind matters more than its size suggests, since investor group data collection is an operationally heavy exercise that involves tracing beneficial ownership chains. One question the circular leaves open: what happens to an FPI that currently qualifies for the exemption because it holds only Government Securities, but later adds other instruments to its portfolio? The circular does not say whether the investor group requirement reattaches automatically from that point or whether some notice or reassessment step applies. Compliance teams would be well advised to build a monitoring trigger for this scenario rather than wait for further clarification from SEBI.
Document: SEBI Circular — Ease of Regulatory Compliances for FPIs Investing Only in Government Securities
Issuing authority: Securities and Exchange Board of India
Reference number: HO/(485)2026-AFD-POD2/I/20296/2026
Date: September 7, 2026
Signatory: Manish Kumar Jha, Deputy General Manager
Primary source: www.sebi.gov.in, under "Legal — Circulars"
This article is for informational and educational purposes only and does not constitute legal or regulatory advice. Readers should verify the applicable primary regulatory source before taking action.
