SEBI is considering giving offshore funds more time to disclose investors, raising reporting thresholds and widening exemptions as it looks to ease regulatory hurdles and attract long-term foreign capital.
India’s market regulator is considering easing disclosure requirements for offshore funds classified as high risk, as complaints and legal challenges mount over rules introduced in 2023 during regulatory scrutiny of the Adani Group, Reuters reported exclusively, citing three sources familiar with the matter.
The proposed changes by the Securities and Exchange Board of India (SEBI) are aimed at addressing what investors have described as unintended consequences of regulations designed to prevent offshore funds from holding highly concentrated investments in Indian companies.
According to Reuters, the regulator is considering expanded exemptions that could give offshore funds more time to disclose their investors and make it easier for thematic funds to invest in India.
The review comes as foreign portfolio investors have sold a record $26.88 billion worth of Indian assets so far in 2026.
“There is concentrated effort to ease pain points and attract long-term foreign capital,” one of the sources told Reuters.
Under the existing framework, funds are considered “high risk” when they hold more than 50 per cent of their Indian assets in a single group of companies.
The threshold has prompted appeals from investor associations in Asia and the United States as well as legal challenges from some offshore funds, leading SEBI to review the regulations, according to the Reuters report.
More from BusinessThe three sources declined to be identified because they were not authorised to speak to the media. Reuters said an email query sent to SEBI on Monday did not receive a response.
SEBI weighs three changes to offshore fund rules
According to two sources cited by Reuters, SEBI is examining three proposals: exempting funds that have only recently started investing in India from disclosure requirements for six months to a year, raising the threshold at which investor details must be reported, and expanding the list of countries and regulators eligible for exemptions.
Discussions are being held internally, after which SEBI is expected to submit its recommendations to a panel that includes external members before seeking feedback from the public, the sources said.
Offshore funds challenge SEBI regulations
At least two funds have challenged SEBI’s regulations, according to court filings cited by Reuters. The funds failed to secure exemptions because they were not recognised under the low-risk category.
Among them is Generation Investment Management, the sustainability-focused investment firm co-founded by former US Vice President Al Gore and former Goldman Sachs Asset Management CEO David Blood.
The asset manager manages $25 billion and has $833 million in assets in India. It faces disclosure requirements on planned new investments, prompting it to file an appeal in January.
Generation Investment Management argued that its funds typically identify one stock when they begin investing, which could mean 100% of their Indian assets are initially invested in one company.
“Discretionary decision making is impaired by the ongoing compliance requirement,” the fund said.
A second case was filed in January by Thailand-listed seafood producer Thai Union Group PCL, which invests through its investment vehicles in seafood businesses in Japan, Australia and the United States.
In India, it had invested in only one company in 2008-2009. After SEBI’s new rules required disclosure of ultimate investors, the fund chose to exit part of its investment in 2025, saying its wide shareholding would make compliance difficult.
SEBI subsequently imposed a 5 per cent penalty on its sale proceeds for failing to disclose its investors. The fund is seeking a waiver of the penalty in its court appeal, arguing that its “non-compliance is due to circumstances beyond its control”.
Its parent company has more than 50,000 publicly traded shareholders, making it practically impossible to furnish ultimate investor disclosures, according to case filings cited by Reuters.
Reuters said an email query sent to Thai Union on Monday did not receive a response.
