Foreign Portfolio Investors (FPI)
4 questions. Each answer is explained.
Question 1 of 4Practice · Series VI — Depository Operations
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Learn these topics
More units in NISM Series VI
- Introduction to the Indian Capital Market8
- Introduction to Depository12
- Depository and its Business Partners10
- Functions of Depository Participant – Account Opening18
- Functions of Depository Participant – Account Operations14
- Functions of Depository Participant – Transmission and Nomination14
- Functions of Depository Participant – Dematerialisation18
- Functions of Depository Participant – Trading and Settlement16
- Special Services – Pledge & Hypothecation12
- Special Services – Public Offering / Corporate Actions12
- Special Services – Debt Instruments & Government Securities6
- Investor Services6
Exam format
| Questions | 100 · 1 mark each |
|---|---|
| Duration | 120 min · 2 hours |
| Pass mark | 60% · 60 of 100 marks |
| Negative marking | 25% · 0.25 marks off per wrong answer |
| Certificate validity | 3 years · from the date of the examination |
| Marks for this unit | Not published by NISM |
NISM Series VI Depository Operations
Exam rules read on NISM's site on 3 October 2026. Check the current rules on NISM's site (opens in a new tab)
What these answers assume, and when it was last checked
Each question uses the rules listed below. We last checked them on 5 September 2026. A Budget or SEBI circular can change a rate, lot size or expiry day. If a rule changes before your exam, treat the linked questions as out of date and check NISM's current workbook.
- NSE uses Tuesday expiry and BSE uses Thursday expiry. This applies from 1 September 2025.
- The January 2026 index lot sizes are NIFTY 65, BANKNIFTY 30, FINNIFTY 60, MIDCPNIFTY 120 and NIFTYNXT50 25.
- The October 2024 SEBI framework sets a minimum index contract value of Rs 15–20 lakh. Each exchange may list one weekly benchmark index.
- Option buyers pay the premium upfront from 1 February 2025. A short index option has an extra 2% Extreme Loss Margin on expiry day from 20 November 2024.
- Equity short-term capital gains are taxed at 20%. Long-term gains are taxed at 12.5% above Rs 1.25 lakh. Both rates apply from 23 July 2024.
- F&O income is non-speculative business income in ITR-3. NSE equity derivatives trade from 9:15 a.m. to 3:40 p.m.
- The final ten-minute session began on 3 August 2026. It aligns with the cash market Closing Auction Session.
- Most Securities Transaction Tax questions test the base and who pays. On an option sale, it is the premium and the seller pays. On a futures sale, it is the traded value and the seller pays.
- On exercise, Securities Transaction Tax uses intrinsic value: settlement price minus strike price. The buyer pays it.
- Two questions test the current rate. From 1 April 2026, option sales carry 0.15% on the premium and futures sales carry 0.05% on traded price. The earlier rates were 0.10% and 0.02% from 1 October 2024.
- This section uses the T+1 rolling settlement cycle. Obligations are fixed on T+1. A short delivery goes to buy-in auction on T+1 and settles on T+2.
- The trade-for-trade surveillance segment uses direct close-out. Funds pay in by 10:30 a.m. and pay out on or after 1:30 p.m. on settlement day.
- Securities pay in to the settlement pool by 10:30 a.m. They pay out directly to the client’s demat account by 3:30 p.m.
- The 3:30 p.m. deadline replaced 1:30 p.m. under SEBI’s 10 October 2024 circular. Direct client credit was required by SEBI’s 5 June 2024 circular.
- The optional T+0 cycle trades until 1:30 p.m. Obligations are fixed by 2:30 p.m. on the trade day. An early pay-in shortage is closed out directly.
- Cash-market Value at Risk margin is six times exponentially weighted moving-average volatility. It has a 9% floor for Group I, a 21.5% floor for Group II, and a fixed 50% or 75% level for Group III.
- Extreme Loss Margin is 3.5% for a share and 2% for a broad-market-index exchange traded fund. Mark-to-market margin is collected before the next day’s trading. The trade-for-trade segment has 100% upfront margin.
- Close-out uses the higher of the highest price from trade day to auction day and 20% above the auction day’s official close.
- A funds shortage costs 0.07% a day. The trading facility is withdrawn at a shortage of Rs 5 lakh or more.
- SCORES allows 21 calendar days, then two 15-day review levels. Online Dispute Resolution moves from conciliation to arbitration after the market participant and SCORES steps.
- At NSE, the Investor Protection Fund limit is Rs 35 lakh per investor for each defaulting or expelled member. This applies to claims arising after 13 August 2024.
- A Basic Services Demat Account has no annual maintenance charge up to Rs 4 lakh of holdings. It costs up to Rs 100 above that, until the Rs 10 lakh eligibility ceiling. These slabs apply from 1 September 2024.
- The rupee pairs are USD-INR, EUR-INR, GBP-INR and JPY-INR. The cross-currency pairs are EUR-USD, GBP-USD and USD-JPY.
- Each contract covers 1,000 units of the foreign currency, except JPY-INR. JPY-INR covers 100,000 yen and is quoted in rupees per 100 yen.
- The tick is 0.25 paise, or Rs 0.0025. It equals Rs 2.50 a contract.
- Rupee pairs trade from 9:00 a.m. to 5:00 p.m. A monthly contract stops trading at 12:30 p.m. two working days before the expiry month’s last business day.
- Final settlement is in cash at the FBIL reference rate on expiry day. FBIL, Financial Benchmarks India, has published this rate in place of the Reserve Bank since 2018. Premium-style European options are quoted in rupees. The buyer pays the premium in cash on T+1.
- Daily settlement is on T+1 and final settlement is on T+2.
- NSE Clearing circular 026/2020 sets SPAN margin plus Extreme Loss Margin. The futures margin is 0.50% for USD-INR, 0.15% for EUR-INR, 0.25% for GBP-INR and 0.35% for JPY-INR. A short option has 0.75%. These figures apply from 1 June 2020.
- A USD-INR client may hold 6% of total open interest or USD 20 million, whichever is higher. A trading member may hold 15% or USD 100 million.
- A resident user has one USD 100 million equivalent limit across all rupee pairs and exchanges. No document is needed below that limit, but a valid underlying contracted exposure must still exist. This clarification applies from 3 May 2024.
- The currency segment has no Securities Transaction Tax.
The exam figures (questions, time, pass mark, negative marking and certificate validity) come from NISM's own pages, read on 3 October 2026. Timed practice uses the same figures. Study with the official workbook as well.
The written-out answers on this page are hidden while your timed set runs.
All 4 questions on Foreign Portfolio Investors (FPI), with answers
Q1Under the FPI Regulations, who grants an eligible applicant its FPI registration certificate on behalf of SEBI?
Option A. The custodian automatically, regardless of DDP approval
Why it is wrong: Custodial service and approved DDP status must not be treated as identical automatically.
Option B. The designated depository participant — Correct answer
Option C. Any registered DP without designated status
Why it is wrong: The designated regulatory role requires the relevant approval. Ordinary DP registration alone is not enough.
Option D. The stock exchange merely on issuing a trading client code
Why it is wrong: A trading identifier is not an FPI registration certificate.
Answer: B. The designated depository participant grants the certificate on SEBI’s behalf after satisfying itself that the applicant meets the requirements. This is a specific approved regulatory role, not a power held automatically by every entity that offers an ordinary demat or trading account. Remember: A designated DP role is distinct from merely servicing a demat account.
Hint, shown before you answer in practice mode: Common mistake: Assuming any DP or broker can register an FPI without the required designation.
VI-141mediumregulatory
Q2An otherwise eligible sovereign wealth fund applies for FPI registration as a government-related investor. Which category is specified for this type under Regulation 5?
Option A. The former Category III as a compulsory class
Why it is wrong: The former three-category framework should not be substituted for the current regulations.
Option B. Category I — Correct answer
Option C. Category II solely because it is foreign
Why it is wrong: Foreign status is common to the framework and is not by itself the Category II test.
Option D. No category because government-related investors are excluded
Why it is wrong: Government-related investors are specifically included rather than universally excluded.
Answer: B. Regulation 5 includes government and government-related investors, including sovereign wealth funds, within Category I, subject to the applicable requirements. The applicant’s type and regulatory characteristics matter. Foreign status alone does not place every investor into the same residual category. Remember: Apply the category definition to the actual applicant type.
Hint, shown before you answer in practice mode: Common mistake: Using an obsolete FPI classification or classifying all foreign investors identically.
VI-142mediumapplication
Q3A large overseas institution applies as an FPI but its eligibility review raises sanctions and beneficial-ownership concerns. Does its size permit the DDP to ignore those concerns?
Option A. Yes. Institutional applicants never have underlying investors that need examining
Why it is wrong: An institutional structure can still require ownership and control analysis.
Option B. Yes. A portfolio of this size is accepted in place of all the prescribed checks
Why it is wrong: Portfolio size is not an automatic substitute for regulatory eligibility.
Option C. No. The eligibility, sanctions and due-diligence conditions still have to be met — Correct answer
Option D. No checks are needed at all if the applicant agrees not to vote on any of its holdings
Why it is wrong: Voting intentions do not remove the applicable onboarding conditions.
Answer: C. The FPI framework contains eligibility and due-diligence requirements, including relevant jurisdictional, sanctions, underlying-investor/control and fit-and-proper conditions. Size or institutional status does not create an automatic blanket exemption. The DDP must apply the relevant provisions and any valid exemptions specifically rather than invent a large-investor waiver. Remember: Assess exemptions by the actual rule, not by customer prominence.
Hint, shown before you answer in practice mode: Common mistake: Relaxing eligibility checks because an applicant is commercially attractive.
VI-143hardapplication
Q4An FPI states that its registration certificate alone allows every proposed Indian securities transaction, regardless of instrument-specific restrictions. Which response is correct?
Option A. The registration certificate overrides every sectoral and instrument limit
Why it is wrong: Registration operates within, rather than above, the applicable investment conditions.
Option B. A credit to the demat account makes an otherwise prohibited transaction allowed
Why it is wrong: A system entry cannot cure a transaction that violates governing restrictions.
Option C. Registration does not remove the investment conditions and transaction restrictions — Correct answer
Option D. After registration, only the size of each order matters, not the type of instrument
Why it is wrong: Transaction size is only one possible consideration and not the sole test.
Answer: C. FPI registration admits the investor to the regulatory framework. It is not an exemption from that framework. Permitted investments, applicable limits, custodial arrangements and continuing duties must still be observed. Operational ability to record a security does not establish legal permission for every proposed investment. Remember: Investor registration and permission for a particular investment are separate checks.
Hint, shown before you answer in practice mode: Common mistake: Treating onboarding approval as blanket approval of all future instructions.
VI-144hardapplication
Foreign Portfolio Investors (FPI): common questions
How many practice questions are there on Foreign Portfolio Investors (FPI)?
4 questions, all written out on this page with the correct answer and why each other option is wrong. This unit is one of the 13 practice topics for NISM Series VI, which has 150 questions in total.
Are these real NISM Series VI questions on Foreign Portfolio Investors (FPI)?
No. LearnNifty wrote every question from NISM's public syllabus. NISM does not publish its question bank, so nobody can offer you the real paper. Use these questions to check that an idea has gone in. Use the official NISM workbook to see what is examined.
Does negative marking apply to NISM Series VI?
Yes. NISM takes off 25% of a question's marks for a wrong answer. On a 1-mark question that is 0.25 marks off. A blank question earns nothing and loses nothing, so a wrong guess costs marks on this paper. Timed practice here uses the same rule.
Are these practice questions kept up to date?
Each question is written against the rules printed on this page, last checked on 5 September 2026. A Budget or a SEBI circular can change a rate, a lot size or an expiry day. If one of those rules changes before your exam, treat the questions that use it as out of date. Then check NISM's current workbook.
Investor Services
6 questions on Investor Services. Its quiz opens on that unit.
Open Investor Services