Which of the following is issued by registered foreign portfolio investors to overseas investors who want to be part of the Indian stock market without registering themselves directly?
Answer & explanation
Answer: (d) Participatory Note
A Participatory Note (P-Note, now officially called an Offshore Derivative Instrument) is what a registered foreign portfolio investor issues abroad to an overseas investor who wants exposure to Indian securities without registering with SEBI. The FPI keeps the securities; the economic benefit passes to the note-holder.
- ✓ (d) SEBI describes ODIs (the erstwhile P-Notes) as derivative instruments issued overseas by FPIs against securities held in India; the FPI stays the owner of the underlying securities while the investor gets the economic benefit.
- ✗ (a) A Certificate of Deposit is a deposit-type instrument issued by banks to raise funds, not an instrument through which a foreign investor buys exposure to Indian shares.
- ✗ (b) Commercial Paper is a short-term borrowing instrument issued by companies, not a route for foreign investors to hold Indian equities indirectly.
Remember · P-Notes (Offshore Derivative Instruments) are issued abroad by SEBI-registered FPIs to foreign investors who avoid direct registration; the FPI holds the underlying Indian securities.
Sources
- SEBI Board Memorandum (Oct 2024): Proposal to address regulatory arbitrage with respect to Offshore Derivative Instruments and FPIs with segregated portfolios ↗ “ODIs (erstwhile P-Notes) are derivative instruments issued overseas by FPIs against securities held in India as its underlying. … Participatory Notes (P-Notes) to foreign investors who wanted exposure to Indian markets, without the complexities of direct registration with SEBI”
Question and answer: UPSC's official GS Paper I (2019, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 30 Sept 2026 (how we verify). ·