The Securities and Exchange Board of India (SEBI) on April 24, 2026, notified regarding the Framework for net settlement of funds for transactions done by Foreign Portfolio Investors (FPIs) in the cash market.
The following has been stated:
• It has permitted Foreign Portfolio Investors (FPIs) to use net settlement of funds for outright transactions in the cash market to improve efficiency and reduce funding costs. Earlier, FPIs were required to settle all transactions on a gross basis, which increased liquidity needs and operational challenges.
• Under the revised framework, only outright buy or sell transactions (not both in the same security during a settlement cycle) can be netted to determine net fund obligations. In contrast, transactions involving both buy and sell will continue to be settled on a gross basis. Securities settlement will still remain on a gross basis, and charges like STT and stamp duty will continue as before.
• The change aims to reduce liquidity pressure, forex-related costs, and operational inefficiencies, especially during high-volume periods like index rebalancing. The new system is to be implemented by December 31, 2026, with custodians and stakeholders required to update their systems accordingly.
[Notification no. - HO/(1)2026-AFD-POD2/I/10157/2026]
