RBI announces changes for long-term FPI investment

The Reserve Bank of India in its sixth bimonthly monetary policy eased foreign portfolio investors' (FPI) investment in corporate and government securities (G-Sec) and also doubled domestic individuals' foreign investment limit to $250,000. The FPI debt limit in G-Sec remains unchanged at $30 billion.

However, to incentivise long-term investors, it has been decided to enable reinvestment of coupons in G-Sec even when the existing limits are fully utilised.

All future investment by FPIs in the debt market in India will be required to be made with a minimum residual maturity of three years. While G-Sec investment already had this rider, the same will now be applicable also to corporate bonds.

Accordingly, all future investments by an FPI within the limit for investment in corporate bonds shall be required to be made in corporate bonds with a minimum residual maturity of three years. Further, all future investments against the limits vacated when the current investment runs off either through sale or redemption, shall be required to be made in corporate bonds with a minimum residual maturity of three years.

FPIs shall not be allowed to make any further investment in liquid and money market mutual fund schemes. There will, however, be no lock-in period and FPIs shall be free to sell the securities (including those that are presently held with less than three years residual maturity) to domestic investors.

The aforesaid directions come into force with immediate effect. Further operational guidelines, if any, will be issued by SEBI. All other existing conditions for investment by FPIs in the debt market remain unchanged.

Powered by Capital Market - Live News