RBI allows FPIs to invest in unlisted debt securities

To attract more foreign funds into capital markets, Reserve Bank has allowed FPIs to invest in unlisted debt securities as well as in securitised debt instruments.
The RBI directives follows government announcement in the Union Budget 2016-17 to expand the scope of investment by foreign investors.
It has now been decided to expand the investment basket of eligible instruments for investment by FPIs under the corporate bond route to include unlisted debt securities and securitised debt instruments, the RBI said.
As per the RBI directive, foreign portfolio investors (FPIs) can invest in the primary issues of non-convertible debentures/bonds by a public company.

Such investment would be permitted only if the issuing company does not use the borrowing proceeds for real estate activities, purchase of land, investing in capital market or on-lending to other entities, it said.
For securitised debt instruments, the RBI said FPIs can invest in any certificate or instrument issued by a special purpose vehicle set up for securitisation of assets where banks, FIs or NBFCs are originators.
As per earlier rules, foreign portfolio investors (FPIs) were permitted to invest only in listed or to-be-listed debt securities.
Investment in unlisted debt securities was permitted only in case of companies in the infrastructure sector. Investment by FPIs in securitised debt instruments was not permitted.