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SEBI Notifies FVCI Amendment Regulations 2026: DDP-Based Registration and FPI Framework Alignment

  • Writer: Kaustav Chowdhury
    Kaustav Chowdhury
  • Aug 12
  • 7 min read

Introduction


The Securities and Exchange Board of India (SEBI) has notified the SEBI (Foreign Venture Capital Investors) (Amendment) Regulations, 2026, through Notification No. SEBI/LAD-NRO/GN/2026/309 dated 3 July 2026. This notification is part of SEBI's continued effort to modernise and streamline the regulatory framework governing Foreign Venture Capital Investors (FVCIs) in India. The amendment builds upon the significant structural changes introduced by the SEBI (FVCI) (Amendment) Regulations, 2024, which shifted the registration process from SEBI to Designated Depository Participants (DDPs) and aligned the FVCI governance framework with the Foreign Portfolio Investor (FPI) regulations.


The July 2026 notification specifically addresses the redenomination of registration, renewal, and late fees from US Dollars to Indian Rupees, prescribes a new five-working-day DDP remittance timeline, and operates within the broader context of the SWAGAT-FI (Single Window Automatic and Generalised Access for Trusted Foreign Investors) framework that became effective on 1 June 2026. This article provides a comprehensive analysis of the amendment, its interaction with the prior regulatory changes, and its implications for foreign investors seeking to invest in India's venture capital ecosystem.



Background: The FVCI Regulatory Framework


The SEBI (Foreign Venture Capital Investors) Regulations, 2000, established the original framework for registration and regulation of FVCIs in India. Under this framework, foreign entities seeking to make venture capital investments in Indian companies were required to register directly with SEBI, comply with investment restrictions, and adhere to reporting requirements. FVCIs have historically been permitted to invest in equity or equity-linked instruments of unlisted Indian companies in sectors such as biotechnology, nanotechnology, IT hardware and software, seed research and development, and related knowledge-based industries.


Over the years, the FVCI framework operated in parallel with the FPI framework, leading to regulatory arbitrage and administrative inefficiencies. FVCIs and FPIs were governed by different registration processes, different compliance requirements, and different fee structures, despite both being channels for foreign investment into Indian markets. For investors navigating foreign investment compliance, our guide on filing Form FC-GPR after receiving FDI provides essential procedural details.



The 2024 Amendment: DDP-Based Registration


The SEBI (Foreign Venture Capital Investors) (Amendment) Regulations, 2024, notified on 5 September 2024 and effective from 1 January 2025, introduced the most significant structural change to the FVCI framework since its inception. The amendment transferred the responsibility for processing FVCI registration applications from SEBI to Designated Depository Participants (DDPs). Under the new framework, a DDP registered with SEBI has the authority to process registration applications, conduct due diligence, and issue registration certificates on behalf of SEBI.


This shift was modelled on the FPI registration process, where DDPs have been performing a similar gatekeeping function for several years. The alignment eliminates the need for SEBI to directly handle routine registration applications, allowing the regulator to focus on policy formulation, systemic risk management, and enforcement. The amendment also introduced a requirement that existing FVCIs must onboard a DDP by 31 March 2025, failing which they would not be permitted to make further investments and would be required to liquidate their investments in listed securities by 31 March 2026. Investors should also be aware of the RBI's proposed new FEMA Foreign Investment Rules 2026 which further reshape the foreign investment landscape.


The 2024 amendment also imposed restrictions on FVCI applicants connected to countries identified by the Financial Action Task Force (FATF) as having deficiencies in Anti-Money Laundering or Combating the Financing of Terrorism frameworks. Persons on the United Nations Security Council's sanctions list are expressly prohibited from being an FVCI applicant or beneficial owner.



The July 2026 Notification: Fee Redenomination


The notification dated 3 July 2026, which forms the subject of this article, addresses the fee structure for FVCI registration. Previously, FVCI registration and renewal fees were denominated in US Dollars, with the standard registration fee being USD 2,500. The July 2026 amendment redenominates these fees to Indian Rupees, setting the registration charge at Rs. 2.3 lakh (approximately equivalent to the earlier USD amount at prevailing exchange rates). The renewal fee and late submission fees have similarly been converted to rupee-denominated amounts.


The redenomination is effective from 30 December 2026, providing a transition period for DDPs and FVCI applicants to adjust their processes. Under the new framework, the DDP is required to remit the collected fee to SEBI in rupees within five working days of registration being granted. Foreign investors will pay the rupee-equivalent amount in eligible foreign exchange through their designated depository participant, ensuring that the fee collection process is integrated with the existing investment infrastructure. This five-day remittance timeline is a new requirement that imposes operational discipline on DDPs and requires them to maintain adequate systems for timely fee processing and transfer.


This change aligns the FVCI fee structure with the FPI fee structure, which was similarly redenominated to INR. The alignment eliminates the exchange rate variability that previously affected the effective cost of FVCI registration and ensures consistency across SEBI's foreign investor frameworks. From an administrative perspective, the redenomination also simplifies SEBI's internal accounting and revenue tracking by consolidating all foreign investor fees in a single currency. For more on SEBI's recent regulatory changes, see our analysis of the SEBI Buy-back of Securities Amendment Regulations 2026.



The SWAGAT-FI Framework


The July 2026 fee amendment operates within the broader context of the SWAGAT-FI (Single Window Automatic and Generalised Access for Trusted Foreign Investors) framework. SEBI issued two circulars dated 16 January 2026 establishing the SWAGAT-FI framework for both FPIs and FVCIs, with the framework becoming effective from 1 June 2026.


The SWAGAT-FI framework introduces a single-window mechanism that allows eligible foreign investors to simultaneously apply for FVCI and FPI registration through the same DDP, provided they appoint the same custodian. This eliminates the need to submit separate application forms and supporting documents for each registration category, significantly reducing the administrative burden on foreign investors who wish to participate in both the venture capital and portfolio investment segments of the Indian market.


Key features of the SWAGAT-FI framework include extension of the registration validity period to ten years (from the earlier shorter periods), a unified accounting and investment framework enabling investors to hold securities acquired as FPIs, FVCIs, or as foreign investors in investment vehicle units in a consolidated manner, and reduced compliance burdens through harmonised reporting requirements. The framework reflects SEBI's broader strategy of making India a more accessible and efficient destination for foreign capital. For related investor protection mechanisms, see our guide on how to file an investor complaint with SEBI.



Registration Process and Requirements


Under the current framework, as amended by the 2024 and 2026 regulations, the FVCI registration process follows these key steps. The foreign entity must first identify and engage a Designated Depository Participant registered with SEBI. The DDP serves as the primary interface between the FVCI applicant and the regulatory system, handling application processing, due diligence, and ongoing compliance monitoring.


The applicant submits the registration application along with the prescribed fee (Rs. 2.3 lakh from 30 December 2026 onwards, or the prevailing USD equivalent until then) and all required documentation, including proof of incorporation, regulatory approvals from the home jurisdiction, details of beneficial ownership, and compliance certifications regarding FATF and UNSC sanctions. The DDP conducts its due diligence review, verifying the applicant's eligibility, regulatory status, and compliance with anti-money laundering requirements.


Upon satisfactory completion of due diligence, the DDP issues the registration certificate on behalf of SEBI. The registration is valid for ten years under the SWAGAT-FI framework, after which renewal is required. The DDP remits the registration fee to SEBI within five working days of granting the registration. Throughout the registration period, the FVCI must comply with reporting requirements, investment restrictions, and governance standards prescribed by SEBI.



Investment Sectors and Permitted Activities


SEBI-registered FVCIs are permitted to invest in a defined set of sectors and instruments. The permitted sectors include biotechnology, nanotechnology, IT hardware and software, seed research and development, dairy, and other knowledge-based industries as may be specified by SEBI. Additionally, FVCIs can invest in equity or equity-linked instruments or debt instruments issued by Indian startups, irrespective of the sector in which the startup operates. This sector-agnostic approach for startup investments reflects SEBI's recognition that innovation increasingly occurs at the intersection of traditional sectors and that rigid sectoral restrictions may impede the flow of venture capital to promising enterprises.


FVCIs may invest in securities of unlisted companies, units of venture capital funds, and, subject to certain conditions, in listed companies. The investment must be made through the Demat route, and the FVCI must hold its securities through the custodian and DDP appointed at the time of registration. The Demat holding requirement ensures transparency, facilitates regulatory monitoring, and integrates FVCI holdings into the existing depository infrastructure. Understanding equity-based investment structures is important in this context, and our guide on designing and implementing an ESOP under the Companies Act covers a related aspect of equity allocation in Indian companies.


FVCIs are also subject to pricing guidelines prescribed by the Reserve Bank of India for investments in unlisted securities. The entry and exit pricing must comply with the applicable valuation norms, ensuring that investments are made at fair market value and preventing potential abuse through over-valuation or under-valuation of securities. These pricing norms interact with SEBI's own disclosure requirements, creating a layered compliance framework that FVCIs and their advisors must navigate carefully.



Compliance and Enforcement


The DDP-based framework introduces an additional layer of compliance oversight that strengthens the enforcement architecture for FVCIs. DDPs are responsible for monitoring the ongoing compliance of FVCIs with SEBI regulations, including investment restrictions, reporting requirements, and anti-money laundering obligations. This delegated supervision model leverages the existing infrastructure and expertise of depository participants, who already perform similar functions for FPIs, creating a consistent supervisory framework across foreign investment categories.


Non-compliance with SEBI regulations may result in the DDP suspending or cancelling the FVCI's registration, or in SEBI taking direct enforcement action. The amendment regulations have clarified the circumstances under which DDPs must report non-compliance to SEBI, including material breaches of investment conditions, failure to submit periodic disclosures, and any changes in the beneficial ownership structure that could trigger sanctions or FATF-related restrictions. DDPs are also required to maintain detailed records of all compliance monitoring activities for inspection by SEBI.


The enforcement framework for foreign arbitral awards is also relevant for foreign investors operating in India, particularly where disputes arise from venture capital investments or shareholder agreements. For a discussion of cross-border enforcement issues, see our analysis of the Supreme Court's recognition of transnational issue estoppel in the enforcement of foreign awards.



Conclusion


The SEBI (FVCI) (Amendment) Regulations, 2026, along with the SWAGAT-FI framework and the earlier 2024 amendments, represent a comprehensive modernisation of India's regulatory framework for foreign venture capital investment. The shift to DDP-based registration, the redenomination of fees to Indian Rupees, the single-window registration mechanism, and the extended validity period collectively make the FVCI route more accessible, efficient, and aligned with international best practices. Foreign investors and their advisors should familiarise themselves with the new framework and ensure compliance with the revised fee structure (effective 30 December 2026) and the SWAGAT-FI requirements (effective 1 June 2026).


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