RBI lifts restriction on FPI investment in bonds

The Reserve Bank of India (RBI) on Thursday allowed foreign portfolio investors (FPIs) to invest in any kind of debt instrument, provided the residual maturity of the paper is three years and the proceeds are not used in real estate.

The step was first announced in the Union Budget 2016-17. “Investment by FPIs in the unlisted corporate debt securities and securitised debt instruments shall not exceed Rs 35,000 crore within the extant investment limits prescribed for corporate bond from time to time, which currently is Rs 2,44,323 crore.”

However, investment by FPIs in securitised debt instruments would not require having minimum three-year residual maturity.

Securitised debt instruments are defined as any certificate or instrument issued by a special purpose vehicle set up for securitisation of assets where banks, financial institutions or non-banking finance companies are originators; and/or any certificate or instrument issued and listed in terms of the Securities and Exchange Board of India regulations on public offer and listing of securitised debt instruments.