The full form of P-Notes is Participatory Notes

A participatory note, commonly known as a P-note or PN, is an instrument issued by a registered foreign institutional investor (FII) to an overseas investor who wishes to invest in Indian stock markets without registering themselves with the market regulator, the Securities and Exchange Board of India (SEBI).

SEBI permitted foreign institutional investors to register and participate in the Indian stock market in 1992. These notes are a unique Indian invention started in 2000 by SEBI to enable foreign corporates and high networth investors enter the Indian market without having to go through the process of registering as Foreign Institutional Investor (FII).

Investing through P-notes is very simple, and hence very popular amongst foreign institutional investors. The absolute value of P-notes investments rose to a record of ₹4.5 trillion (equivalent to ₹11 trillion or US$150 billion in 2019) in October 2007. However, mainly due to SEBI’s strengthening of the regulatory framework for P-notes, their investments fell to a record low of ₹1.25 trillion (equivalent to ₹1.4 trillion or US$20 billion in 2019). The amount of foreign portfolio investments (FPIs) via P-notes decreased from a high of 55% to 4.1% between October 2007 and August 2017.