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NRIs hold 0.6% of all NSE listed companies, even as Budget 2026 hiked their limit to 10%

February 10, 2026 5 min read Economics Polity & Governance GS Paper 3 (Indian Economy Capital Markets)
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What Happened

  • Union Budget 2026, presented by Finance Minister Nirmala Sitharaman, raised the individual investment limit for Non-Resident Indians (NRIs) in NSE-listed companies from 5% to 10% of paid-up share capital.
  • The combined aggregate ceiling for all NRI investors together was raised from 10% to 24%.
  • However, data shows NRIs currently hold only 0.6% of the combined value of NSE-listed companies — far below even the earlier 5% individual limit, raising questions about whether raising the ceiling will meaningfully attract more capital.
  • The low utilisation of the existing limit is attributed to regulatory complexity under FEMA, restricted repatriation routes, and competition from the more flexible Foreign Portfolio Investor (FPI) route available to institutional investors.
  • Budget 2026 also promised a broader simplification of FEMA rules for Non-Debt Instruments and Overseas Investments, signalling a shift from a control-oriented to a facilitation-oriented regulatory regime.

Static Topic Bridges

Portfolio Investment Scheme (PIS) — FEMA and RBI Framework

The Portfolio Investment Scheme (PIS) is the regulatory mechanism under the Foreign Exchange Management Act, 1999 (FEMA) through which NRIs can purchase and sell shares and convertible debentures of Indian companies listed on recognised stock exchanges. It is administered by the Reserve Bank of India and requires NRIs to designate a specific bank account (NRE or NRO) for all PIS transactions.

  • PIS operates through a designated bank (called a PIS bank) which monitors the NRI's transactions, ensures compliance with individual limits, and reports to RBI.
  • NRE (Non-Resident External) account: Funds are freely repatriable; income and gains are tax-exempt in India.
  • NRO (Non-Resident Ordinary) account: Funds may be repatriated subject to a $1 million annual limit; income is taxable in India.
  • Pre-Budget 2026 limits: Individual NRI holding capped at 5% of paid-up capital of any company; aggregate NRI holding capped at 10%.
  • Post-Budget 2026: Individual limit raised to 10%; aggregate limit raised to 24%.
  • Budget 2026 also proposes allowing NRIs to invest directly in Indian equities without mandatorily routing through FPI structures.

Connection to this news: The PIS framework is the statutory channel for NRI equity investment; the limit hike is a PIS-level regulatory change, but the 0.6% utilisation data suggests structural barriers — not just legal ceilings — are suppressing NRI equity investment.

Foreign Exchange Management Act (FEMA), 1999

FEMA, 1999 replaced the Foreign Exchange Regulation Act (FERA), 1973 — a shift from a punitive, control-oriented regime to a facilitation-oriented one. It governs all foreign exchange transactions in India, including capital account transactions such as NRI investment in Indian securities.

  • Enacted: 29 December 1999; came into force 1 June 2000.
  • Core principle: Current account transactions are generally permitted unless expressly prohibited; capital account transactions are prohibited unless expressly permitted.
  • Administered by: Reserve Bank of India (for most foreign exchange matters) and the Enforcement Directorate (for FEMA violations/investigations).
  • Non-Debt Instruments (NDI) Rules, 2019 (under FEMA): Govern FDI and portfolio investment — the specific rules applicable to NRI equity investment in listed companies.
  • FERA vs FEMA: Under FERA, violation was a criminal offence; under FEMA, it is a civil offence with financial penalties.
  • Budget 2026 proposes to simplify FEMA's NDI rules to reduce compliance burden and encourage more NRI participation.

Connection to this news: The government's announced simplification of FEMA's NDI and Overseas Investment rules directly addresses the regulatory friction that has kept NRI equity investment at just 0.6% despite a generous 5% individual ceiling.

Foreign Portfolio Investors (FPIs) vs NRI Investment

Foreign Portfolio Investors (FPIs) are registered institutional investors — such as foreign mutual funds, hedge funds, and pension funds — that invest in Indian equities and debt through the Securities and Exchange Board of India (SEBI)'s FPI regime. NRIs are individual investors with a distinct regulatory status, often subject to more restrictive conditions than FPIs.

  • FPI limits: Foreign Portfolio Investors can collectively hold up to 24% of a company's paid-up capital; this can be increased by the company to 49%, or to sectoral limits with board and shareholder approval.
  • FPIs registered with SEBI can trade across asset classes; NRIs under PIS are more restricted to listed equities and convertible bonds.
  • NRI investors who meet FPI eligibility criteria can register as FPIs, bypassing the PIS route and its tighter individual ceilings — an option available to affluent NRIs but not to smaller investors.
  • The Budget 2026 hike effectively brings NRI individual limits closer to what institutional FPIs have enjoyed, potentially encouraging high-net-worth NRIs to invest as individuals rather than through complex FPI structures.

Connection to this news: The fact that NRIs currently hold only 0.6% reflects that the more flexible FPI route has already captured sophisticated NRI capital, leaving only retail NRI investors under the PIS — who face additional friction from NRE/NRO account requirements and bank-by-bank monitoring.

Key Facts & Data

  • NRI shareholding in NSE-listed companies: 0.6% of total market capitalisation (as of Budget 2026 analysis).
  • Pre-Budget 2026 PIS limits: Individual NRI — 5%; aggregate NRI — 10% of paid-up capital.
  • Post-Budget 2026 PIS limits: Individual NRI — 10%; aggregate NRI — 24% of paid-up capital.
  • FEMA, 1999: Replaced FERA, 1973; civil offence regime; RBI is primary administrator.
  • PIS route: Requires designated PIS bank; NRE (repatriable, tax-exempt) or NRO (repatriable up to $1 million/year, taxable) account.
  • FPI aggregate limit: Up to 24% of paid-up capital (can be raised to 49% or sectoral ceiling with board approval).
  • Non-Debt Instruments Rules, 2019: Govern foreign direct and portfolio investment under FEMA.
  • Budget 2026 also announced simplification of FEMA NDI and Overseas Investment Rules.
  • Finance Minister: Nirmala Sitharaman.
  • Relevant regulator for listed company investment: SEBI (Securities and Exchange Board of India); RBI (foreign exchange compliance).