MUMBAI, India | September 22, 2026 —
At a time when foreign investors are pulling billions of rupees out of Indian equities, the Reserve Bank of India has quietly made one part of investing in India easier.
The RBI has relaxed the documentation process for Foreign Portfolio Investors (FPIs), allowing Indian banks to accept certain KYC documents certified by approved authorities outside India.
The message is straightforward:
less paperwork — but not less verification.
The change came through the Reserve Bank of India (Commercial Banks – Know Your Customer) Amendment Directions, 2026, issued on September 18 and effective immediately.
What Has RBI Actually Changed?
Until now, the overseas-document certification facility was specifically available to Non-Resident Indians and Persons of Indian Origin.
The RBI has now extended the same alternative certification route to Foreign Portfolio Investors.
That means an FPI does not necessarily have to bring a document to India merely to complete the certification process.
Instead, Indian banks can accept an original certified copy of specified KYC documents that has been authenticated through one of the channels recognised by RBI.
For foreign investors managing funds across several countries, that may sound like a small regulatory adjustment.
In practice, it can remove a very irritating piece of administrative friction.
Who Can Certify the Documents?
RBI has clearly defined who can authenticate the documents overseas.
Certification can be carried out by:
- authorised officials of overseas branches of Scheduled Commercial Banks registered in India;
- branches of foreign banks that have relationships with Indian banks;
- a Notary Public abroad;
- a Court Magistrate;
- a Judge;
- an Indian Embassy or Consulate General in the country where the non-resident customer lives.
The mechanism is also being reflected across RBI’s KYC directions for different categories of banks, including commercial and co-operative banks.
The Important Catch: KYC Has Not Been Removed
This is where headlines can easily become misleading.
RBI has not abolished KYC for foreign investors.
Banks still have to comply with customer-identification and anti-money-laundering requirements.
What has changed is the route used to certify documents.
In other words:
RBI has simplified the journey, not removed the security gate.
That distinction matters because India wants to reduce unnecessary compliance friction without weakening safeguards around foreign money entering the financial system.
Why This Matters Right Now
The timing is particularly interesting.
Foreign investors have once again turned sellers in India’s secondary equity market.
Data available through September 19 showed FPIs had sold about ₹23,676 crore worth of Indian equities through stock exchanges in September.
That reversal came after two positive months.
FPIs had bought approximately ₹11,045 crore in July and ₹10,231 crore in August.
So just as foreign money is showing renewed nervousness, RBI is making one operational part of investing in India easier.
The two developments are not the same thing — KYC simplification will not magically reverse market selling — but the contrast is hard to miss.
Foreign Investors Are Selling Stocks — But Not Abandoning India
There is another twist hidden inside the September numbers.
FPIs have been heavy sellers in the secondary market, but they have continued putting money into the primary market.
Foreign investors put around ₹2,703 crore into primary-market investments during September through September 19, while year-to-date primary-market investment reached roughly ₹48,550 crore.
That tells a more nuanced story.
Foreign investors are not simply saying:
“Exit India.”
They appear to be becoming more selective.
They are selling listed shares while still participating in some new issues and opportunities.
Why Did Foreign Money Turn Negative Again?
The biggest pressure points are global.
The Iran conflict pushed crude oil sharply higher earlier this month.
At the same time, rising inflation fears and expectations of tighter US monetary policy pushed American bond yields toward levels that became increasingly attractive to global investors.
The US 10-year Treasury yield recently moved above 5% before easing back below that level; on Tuesday it was around 4.93%.
That matters enormously for India.
When US government bonds offer higher returns, international investors can earn attractive yields in dollar assets without taking the additional currency and equity risk associated with emerging markets.
Suddenly, Indian shares have to fight harder for every foreign dollar.
High Oil Prices Hurt India Twice
Expensive crude creates another problem.
India imports a large part of its energy requirement.
Higher oil prices can:
increase the import bill,
pressure the rupee,
raise inflation risks,
squeeze company margins,
and influence expectations for RBI interest rates.
Oil surged above $100 earlier in September as the Middle East conflict disrupted supply expectations, although Brent has subsequently fallen back below that level as hopes of diplomatic progress increased.
For foreign investors, this matters because oil can affect both corporate earnings and India’s macroeconomic stability.
Then Why Would FPIs Still Want India?
Because the other half of the equation remains attractive.
India’s economic growth remains comparatively strong.
Corporate earnings expectations remain supportive in several domestic sectors.
The country also offers investors exposure to a huge consumer market, manufacturing expansion, infrastructure spending and long-term financialisation.
That helps explain why foreign participation has not disappeared even during periods of aggressive secondary-market selling.
RBI’s KYC simplification adds one more small advantage:
getting into the system becomes administratively easier.
Less Paperwork Can Matter More Than It Sounds
Institutional investors deal with enormous compliance requirements.
One extra form is not a big problem.
But dozens of unnecessary verification steps across multiple jurisdictions can become expensive, slow and frustrating.
Allowing recognised overseas authorities to certify documents means an international fund manager can complete part of the KYC process closer to where the investor is located.
That can reduce:
physical-document movement,
administrative delays,
duplicate certification,
and operational costs.
It is unlikely to determine whether a global fund buys the Nifty tomorrow.
But over time, reducing friction can make India’s financial infrastructure easier to navigate.
RBI Is Sending Two Messages at Once
The amendment strikes an interesting balance.
To foreign investors:
India wants your capital and wants compliance to be easier.
To banks:
verification standards still apply.
That may be the most important part of the change.
India does not have to choose between attracting foreign capital and maintaining KYC safeguards.
The goal is to make legitimate investors spend less time proving the same documents repeatedly while keeping anti-money-laundering controls intact.
Will This Bring ₹23,676 Crore Back?
Not by itself.
Foreign portfolio flows are driven primarily by much bigger forces:
US interest rates,
Treasury yields,
oil prices,
the rupee,
Indian valuations,
corporate earnings,
and geopolitical risk.
KYC reform cannot overpower those factors.
But it can remove one more excuse for friction.
And that matters in the long competition for global capital.
India is competing not only on GDP growth or stock-market returns.
It is also competing on how easy, predictable and efficient it is to invest here.
RBI has just made that process a little simpler.
At a time when foreign investors are once again pulling money from Indian shares, that is a small regulatory change with a much bigger message:
the compliance door remains locked — but RBI has made the key easier to use.
