Foreign Portfolio Investors (FPIs) have urged the Securities and Exchange Board of India (SEBI) to permit margin netting, aiming to streamline operations and mitigate foreign exchange costs. Currently, margins are settled on a per-trade or per-exposure basis, with settlements occurring either upfront or within T+1 days, depending on specific categories. For instance, if an FPI buys and sells 1,000 shares of the same company on a single day, each transaction is regarded separately, requiring distinct processing through the clearing corporation.
By allowing margin netting, FPIs would be able to offset positive and negative margin obligations across various trades, eliminating the need for separate postings for each transaction.
Kaku Nakhate, Chief Executive Officer for India at Bank of America, highlighted the potential benefits of reducing currency inflows and outflows, noting the associated costs. During the Global Fintech Fest 2025, she proposed a dynamic approach to margining that could include netting.
Aparna Thyagarajan, Chief General Manager at SEBI, acknowledged the need for a thorough evaluation of any correlation between price and volume, stressing the importance of minimizing regulatory risks. “Of course, from an operational convenience standpoint, it is going to be a great win for the investors,” she stated.
The implementation of this proposal would necessitate collaboration with the Reserve Bank of India (RBI). Thyagarajan pointed out that discussions will focus on how to permit financial netting while considering RBI’s stance on lending to investors and the permissible use of bank resources.
In addition to margin netting, FPIs have called for broader reforms in the market. They recommend revisiting the structure of the securities lending market, which has not gained traction, to facilitate ongoing borrowing and lending of stocks. Furthermore, they suggest a stronger push towards infrastructure funds, which have progressed slowly in India, acknowledging that approximately 40% of alternative investments come from foreign entities.
Published on October 7, 2025.
