Global investors and custodians believe Indian regulators should permit financial netting and dynamic margining across asset classes — reforms they say could unlock significant capital efficiency and deepen foreign portfolio participation in Indian markets.
Speaking at the Global Fintech Festival 2025, Janak Dalal, managing director and head of securities services, Deutsche Bank India, said the current framework for margin requirements in India remains restrictive and capital-intensive for foreign investors.
“Every trade requires fresh margining, and there’s no cross-asset or portfolio-level netting allowed yet,” Dalal said. “If SEBI and RBI can explore financial netting and dynamic margining, India can meaningfully reduce the cost of trading and settlement for foreign investors.”
Dalal’s point drew support from Simon Williams, managing director and head of APAC Markets at BlackRock, who added that India’s capital market reforms have been impressive in the past few years but now need to “move beyond access to efficiency.”
“For FPIs, efficiency isn’t just about onboarding speed anymore,” Williams said. “Capital efficiency through netting and margin harmonisation will define the next leg of India’s integration into global indices.”
Under current rules, foreign portfolio investors must post margins for every equity or derivatives trade without netting exposure across positions or counterparties. This locks up capital, especially for large global funds that run hedged or multi-asset strategies.
Dalal said India has made “remarkable progress” in modernising post-trade infrastructure but should now focus on “capital mobility within the regulatory perimeter.” He pointed out that countries such as Singapore and the UK already allow regulated financial netting under specific risk frameworks.
“It’s not about reducing supervision — it’s about enabling efficient use of capital under supervision,” he said.
Williams added that the demand for dynamic margining — where margins adjust to portfolio risk in real time — is growing across global markets.
“As India’s inclusion in global bond and equity indices expands, institutional investors are comparing post-trade efficiency across markets. Margining and capital treatment are now strategic differentiators,” he said.
Industry executives noted that the next phase of India’s market reform must focus on “liquidity efficiency,” not just market access — particularly as SEBI and RBI look to attract longer-duration foreign capital through funds, derivatives, and debt routes.
A SEBI source said the regulator has not allowed netting of exposure as it could fuel speculative activity. Besides, dynamic margining across asset classes would also require the central bank’s go-ahead.
