While existing ODI positions will be allowed to continue till expiry if they are not in compliance with the relevant provisions of Foreign Portfolio Investment (FPI) Regulations, any additional issuance, renewal or rollover of such non-compliant positions would not be permitted, Sebi said.

However, there are no changes in the existing regulations that FPIs need to comply with while issuing ODIs. P-Notes are mostly used by overseas HNIs, hedge funds and other foreign institutions to invest in Indian markets through registered foreign institutional investors, while saving on time and costs associated with direct registrations. However, there have been often concerns about misuse of this route.

The investments through P-Notes rose to nearly seven-year high of over Rs 2.65 lakh crore at the end of October 2014. As per the norms put in place by Sebi to check any misuse, only those foreign entities, whose country have signed bilateral MoUs with its counterpart, are eligible for issuance of such instruments.

The issuer of such instruments should not be resident of a country identified by Financial Action Task Force (FATF) as "a jurisdiction having a strategic Anti-Money Laundering or Combating the Financing of Terrorism deficiencies to which counter measures apply", a Sebi circular said.

Such restrictions also apply to entities from "a jurisdiction that has not made sufficient progress in addressing the deficiencies or has not committed to an action plan developed with the FATF to address the deficiencies".Sebi said that foreign funds with 'opaque' structures would not be allowed to come in under the new FPI regime.

The regulator said that two or more ODI subscribers having common Beneficial Owner (BO) will be considered together as a single ODI subscriber, in the same manner as is being done in the case of FPIs.

Further, where an investor has investments as FPI and also holds positions as an ODI subscriber, these investment restrictions shall apply on the aggregate of FPI investments and ODI positions held in the underlying Indian company."In other words, the investment as FPI and positions held as ODI subscriber will be clubbed together with reference to the said investment restrictions," Sebi said.

"This circular shall come into effect immediately," it added. The  new regime provides for existing overseas investor classes such as FIIs (Foreign Institutional Investors), their sub-accounts and QFIs (Qualified Foreign Investors) to become FPIs.

Under the new regime, select FPIs (excluding high-risk profile entities) would also be allowed to issue participatory notes. Besides, all new foreign investors keen to invest in Indian markets would also need to register as FPIs, which have been divided into three categories as per their risk profiles.

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