Foreign Portfolio Investors (FPIs) have made representations to the Securities and Exchange Board of India (SEBI) to allow netting of margins for operational ease and to reduce foreign exchange movements.
Currently, margining is performed on a per-trade or per-exposure basis, with upfront or T+1 settlement, depending on the category. For example, if an FPI buys and sells shares of the same company on the same day (say, 1,000 bought and 1,000 sold), each trade is treated separately for settlement — both the purchase and the sale are processed through the clearing corporation as distinct transactions.
If allowed, FPIs can offset positive and negative margin obligations across multiple positions or trades, rather than having to post separately for each trade.
Bank of America calls for easing forex flows
“Can we actually reduce the inflow and outflow of currency? Because that’s a huge cost,” Kaku Nakhate, chief executive officer, India, Bank of America, said at the Global Fintech Fest 2025. The next step could be netting of margins, including a more dynamic approach to examining margins, she said.
SEBI weighs risk and RBI alignment
Aparna Thyagarajan, Chief General Manager at SEBI, said that from a SEBI perspective, they will have to assess whether there is any price-volume correlation and also try to achieve this with minimal regulatory risk. “Ofcourse, from an operational convenience standpoint, it is going to be a great win for the investors,” she said.
Further, this proposal would require collaboration with the Reserve Bank of India (RBI). “How do we look at permitting financial netting subject to the extent that RBI is comfortable with, with respect to how much they look at it as lending to the investor? How much of the bank money would really be used or permitted to be used by RBI on that?” Thyagarajan said.
FPIs also seek broader market reforms
Some of the other suggestions include revisiting the structure of the security lending market, which has not yet taken off, to make it easier for stocks to be borrowed and lent on an ongoing basis. They also seek a further push for infrastructure funds, which have been slow in India, as about 40 per cent of alternative investments come from foreign investors.