RBI Doubles NRI, OCI Equity Investment Limit to 10%

For the tens of millions of Indians living and working outside the country, June 5, 2026 was a date worth marking. At the close of the Reserve Bank of India's Monetary Policy Committee meeting, Governor Sanjay Malhotra announced a set of rule changes to India's overseas investment framework that will directly expand what NRIs, OCI cardholders, and - for the first time - all individual foreign nationals can own in Indian listed companies, without the burden of formal SEBI registration.

The announcement, operationalised through an amendment to the Foreign Exchange Management (Non-Debt Instruments) Rules, 2026, reverses a long-standing constraint that had quietly capped diaspora participation in India's equities rally. It follows the direction first set in the Union Budget 2026, when Finance Minister Nirmala Sitharaman proposed the same doubling - the RBI's June 5 circular is the regulatory confirmation that makes it law.

What Exactly Has Changed

Under the previous framework, an individual NRI or OCI cardholder could hold up to 5 percent of the paid-up equity capital of any single listed Indian company through the Portfolio Investment Scheme (PIS) route - and do so without registering as a Foreign Portfolio Investor (FPI) with SEBI. The combined holding of all NRIs and OCIs in a single company was capped at 10 percent. To exceed either limit, investors had to navigate the more complex and compliance-intensive FPI registration process.

The new rules change three things simultaneously. The individual holding limit has been doubled from 5 percent to 10 percent. The aggregate ceiling for all overseas individual investors combined in a single company has been raised from 10 percent to 24 percent - and critically, this 24 percent ceiling is now the default, not a level that requires a company to pass a special shareholder resolution as was previously required. And the PIS route - previously available only to NRIs and OCIs - has been extended to all individual Persons Resident Outside India (PROIs), including foreign nationals who have no Indian heritage at all.

Why This Matters More Than It Appears

The numbers - 5 to 10 percent, 10 to 24 percent - may look modest in isolation. In practice, the significance is structural. For high-net-worth NRIs and OCI investors who had built meaningful positions in mid-cap and small-cap Indian companies, the previous 5 percent ceiling was a genuine constraint. A concentrated position in a company with a smaller paid-up capital base could push a single investor uncomfortably close to the threshold, forcing either a cap on conviction or the administrative overhead of FPI registration. That friction is now halved.

The raising of the aggregate limit from 10 to 24 percent - as a default rather than a board-level decision - is arguably more significant for market structure. It means that family offices, HNI syndicates, and clusters of diaspora investors can collectively take meaningful positions in listed Indian companies without triggering the FPI compliance machinery at an aggregate level. It deepens India's equity market's openness to patient, long-horizon capital from its own diaspora.

"Greater participation by overseas individual investors can widen the investor base, improve market liquidity, and support capital formation. Sustained foreign inflows can also strengthen India's foreign exchange position by increasing the availability of foreign currency in the financial system."

- Kinjal Shah, Vice-President, Bombay Chartered Accountants' Society

The macro context matters here too. Institutional foreign portfolio investors - the large global funds - have been net sellers in Indian equities through the first half of 2026. The RBI's move is, in part, a deliberate effort to replace that institutional selling pressure with a more stable and domestically connected investor class: the Indian diaspora. India received a record $135.46 billion in personal remittances in FY2024-25, up 14 percent year-on-year. By removing friction from the direct equity investment channel, the RBI is attempting to redirect a fraction of those flows into the capital markets.

Who Qualifies, and Through Which Route

All investments under the new framework are made through the Portfolio Investment Scheme, which requires an NRE or NRO bank account, a PIS permission letter from a designated bank, and a linked demat and trading account with a SEBI-registered broker. Investments are delivery-based only - intraday trading remains prohibited for NRIs and OCIs under existing SEBI and RBI rules. The new inclusion of foreign nationals under the PIS route marks a significant expansion: previously, non-Indian individuals who wished to invest in listed Indian equities had no option but the full FPI route. Now they have the same simplified entry point as the diaspora.

What Remains Unchanged - and What to Watch

The FPI route remains mandatory for any single overseas investor seeking a stake above 10 percent. The prohibition on agricultural land, plantation property, and sectors restricted under FEMA remains fully in force for NRIs and OCIs. Intraday trading is still off-limits. And the RBI continues to monitor foreign ownership ceilings on a daily basis, with internal cut-off alerts set two percentage points below the formal ceiling - a practice that has been in place for decades and remains unchanged.

The full amendment to FEMA (Non-Debt Instruments) Rules, 2026 is pending gazette notification as of the June 5 announcement. Banks and brokers will update their PIS permission frameworks once the formal notification is issued. NRIs and HNIs with existing PIS accounts should confirm with their designated bank when the revised limits become operationally effective - the regulatory signal is clear, but the operational window for implementation will follow in the coming weeks.

The Larger Signal

Read alongside the India-US tariff deal concluded in February 2026 and the RBI's successive rate cuts this year, the June 5 announcement forms part of a coherent policy architecture: India is actively competing for diaspora and overseas capital at a time when institutional flows are uncertain and the geopolitical environment in West Asia is disrupting regional investment confidence. For NRIs and HNIs who have been sitting on the sidelines - waiting for administrative complexity to be reduced before building or increasing India allocations - the RBI has removed one of the most tangible barriers. The rest, as always, is a matter of portfolio conviction.