India plans to ease SEBI offshore fund investor disclosure rules for high-risk funds, extending deadlines and raising thresholds to attract long-term foreign capital
India’s market regulator plans to relax disclosure requirements for offshore funds considered high risk, three sources with knowledge of the matter said, after rules introduced during its scrutiny of Adani led to complaints and legal challenges.
The proposed changes would address what investors say were unintended consequences of the 2023 rules that were meant to prevent funds from holding concentrated investments in Indian companies.
The sources said the expanded exemptions will give funds more time to disclose investors, making it easier for thematic funds to invest in India at a time when foreign portfolio investors have sold a record $26.88 billion so far in 2026.
“There is concentrated effort to ease pain points and attract long-term foreign capital,” one of the sources said.
The category of “high risk” was defined as funds that hold more than 50% of their Indian assets in a single group of companies.
Appeal from investors
The threshold triggered appeals from investor associations in Asia and the U.S. and legal challenges from a few offshore funds, prompting a review by the regulator, the sources said.
According to two sources, the regulator is examining three proposals: exempting funds that have only recently begun 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 will submit recommendations to a panel with external members before seeking feedback from the public, the sources said.
Legal challenges
At least two funds have challenged SEBI’s regulations, court filings showed. The funds failed to get exemptions as they were not recognised under the low-risk category.
Among the funds was Generation Investment Management, the sustainability-focused investment firm co-founded by former U.S. Vice President Al Gore and former Goldman Sachs Asset Management CEO David Blood.
The asset manager, which manages $25 billion and has $833 million in assets in India, is facing disclosure requirements on planned new investments, prompting it to file an appeal in January.
The asset manager argued that its funds typically identify one stock when they begin investing, which would mean 100% of its Indian assets are invested in one company.
“Discretionary decision making is impaired by the ongoing compliance requirement,” the fund said.
When contacted by Reuters, Generation Investment Management declined to comment.
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 U.S.
In India, it had invested in only one company in 2008 to 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 it difficult to comply with the requirements.
The case was filed after SEBI levied a 5% penalty on its sale proceeds for failing to disclose its investors. The fund in its court appeal is seeking a waiver of the penalty, saying its ‘non-compliance is due to circumstances beyond its control’.
Its parent company has more than 50,000 publicly traded shareholders and furnishing the ultimate investor disclosures was practically impossible, it said in case filings.
