RBI eases KYC compliance for foreign portfolio investors via overseas certification
Synopsis
The RBI has quietly removed a key friction point for overseas investors: FPIs can now get KYC documents certified abroad — by notaries, judges, embassies, or correspondent bank officials — rather than routing paperwork through India. The change puts FPIs on the same footing as NRIs, and arrives as FPI outflows hit ₹23,676 crore this month amid Iran-US tensions and elevated US bond yields.
Key Takeaways
The RBI has amended KYC rules, allowing Indian banks to accept FPI documents certified by recognised overseas authorities, effective immediately.
Recognised certifiers include Notary Publics , Court Magistrates , Judges , Indian Embassies/Consulates , and authorised officials of overseas branches of Indian Scheduled Commercial Banks.
The facility extends to FPIs a right previously available only to NRIs and persons of Indian origin.
Banks must still conduct full KYC checks; an authorised officer must compare the copy against the original and record the comparison.
FPI outflows reached ₹23,676 crore in September 2026 through Friday, reversing positive inflows seen in July and August .
Global headwinds including the Iran-US conflict and US 10-year yields at 5% continue to weigh on FPI sentiment toward Indian equities.
The Reserve Bank of India (RBI) has relaxed compliance requirements for foreign portfolio investors (FPIs), allowing Indian banks to accept original certified copies of specified Know Your Customer (KYC) documents certified by recognised authorities abroad. The change, effective immediately, was notified through the RBI (Commercial Banks–Know Your Customer) Amendment Directions, 2026 and brings FPIs on par with non-resident Indians (NRIs) and persons of Indian origin who already enjoyed this facility.
What the Amendment Changes
Under the revised framework, Indian banks may now accept KYC document copies certified overseas, eliminating the earlier requirement for FPIs to route certifications through India. Recognised certifying authorities include authorised officials of overseas branches of Scheduled Commercial Banks registered in India, branches of overseas banks with which Indian banks maintain correspondent relationships, a Notary Public abroad, a Court Magistrate, a Judge, or an Indian Embassy or Consulate General in the country where the non-resident customer resides.
Critically, the amendment does not dilute the underlying KYC obligation. Banks remain required to conduct full KYC checks on FPIs, and the existing definition of a certified copy is retained — an authorised bank officer must compare the copy against the original document and record that comparison in accordance with applicable provisions.
How FPIs Benefit
For FPIs domiciled abroad, the practical impact is significant. Previously, arranging document certification through Indian channels added friction and delay to the onboarding process. The new provision lets FPIs use one of several internationally recognised certification channels before submitting the original certified copy directly to their Indian bank, streamlining what had been a time-consuming compliance step.
The change extends a convenience that NRIs and persons of Indian origin have long had access to, aligning the treatment of overseas institutional investors with that of individual non-resident customers.
FPI Flow Backdrop
The amendment comes at a sensitive juncture for foreign capital flows into India. FPI outflows had reached ₹23,676 crore this month through Friday via exchange-based selling, marking a return to negative territory after positive inflows in July and August.
Analysts note that FPI flows remain under pressure from multiple global headwinds, including the ongoing Iran-US conflict and its effect on crude oil prices, as well as elevated US 10-year bond yields at 5%. Both factors are broadly negative for Indian equities and FPI sentiment. On the other side, the resilience of the Indian economy and expectations of stronger corporate earnings growth are seen as stabilising factors that could attract flows back.
Regulatory Context
The RBI has been progressively easing the compliance burden for overseas investors as part of a broader effort to deepen India's capital markets and improve ease of doing business for foreign institutions. This amendment is consistent with that direction, removing a procedural barrier without compromising the integrity of the KYC framework. The directive applies across all scheduled commercial banks operating in India.
With global macro conditions volatile, whether the eased compliance environment translates into sustained FPI inflows will depend as much on external factors as on domestic regulatory reforms.
Point of View
But the primary drivers of FPI flows — US yields, crude, and earnings visibility — remain adverse. The RBI is tidying the plumbing at a moment when the macro water pressure is running against it. Notably, the rule change extends to institutional investors a facility that individual NRIs have had for years, raising the question of why it took this long. The real test will be whether India's broader regulatory ecosystem — including SEBI registration timelines and tax clarity — keeps pace with these incremental KYC improvements.
NationPress
21 Sept 2026
Frequently Asked Questions
What has the RBI changed about KYC rules for foreign portfolio investors?
The RBI has amended its KYC directions to allow Indian banks to accept FPI documents certified by recognised overseas authorities, including notaries, judges, Indian embassies, and correspondent bank officials. The change takes effect immediately under the RBI (Commercial Banks–Know Your Customer) Amendment Directions, 2026.
Which overseas authorities can now certify KYC documents for FPIs?
Recognised certifiers include authorised officials of overseas branches of Scheduled Commercial Banks registered in India, branches of overseas banks with correspondent relationships with Indian banks, a Notary Public abroad, a Court Magistrate, a Judge, or an Indian Embassy or Consulate General in the country where the non-resident customer resides.
Do banks still need to verify KYC for FPIs under the new rules?
Yes. The amendment eases the certification procedure but does not reduce the underlying KYC obligation. An authorised bank officer must still compare the certified copy against the original document and formally record that comparison as per applicable provisions.
Why is this change significant for FPIs?
Previously, FPIs based overseas had to arrange document certification through Indian channels, adding cost and delay. The new rule lets them use internationally recognised certifiers in their home countries, mirroring a facility NRIs have long had, and streamlines the onboarding process for institutional investors.
What is the current state of FPI flows into India?
FPI outflows reached ₹23,676 crore in September 2026 through Friday via exchange-based selling, reversing the positive inflows seen in July and August. Analysts cite the Iran-US conflict, elevated crude prices, and US 10-year yields at 5% as key headwinds, while India's economic resilience and earnings expectations remain supportive factors.
