The Reserve Bank of India, in a bid to attract more overseas inflows and to curb the ongoing fall, both – in Indian currency and in demand for corporate bonds, has eased investment norms for foreign portfolio investors (FPIs) in debt.
Currently, as per the existing framework, FPIs were allowed to invest in various debt market instruments such as government bonds, treasury bills, state development loans and corporate bonds, but with certain limits and restrictions.
“Henceforth, FPIs are permitted to invest in Government securities (G-secs), including treasury bills, and SDLs without any minimum residual maturity requirement, subject to the condition that short-term investments by an FPI under either category shall not exceed 20 per cent of the total investment of that FPI in that category,” RBI said in a notification released yesterday.
The central bank has now allowed FPIs to invest in corporate bonds with minimum residual maturity of above one year. Further, in the corporate bond segment, FPIs are also now permitted to invest with a minimum maturity of three years.
Hereon, the RBI increased the FPIs cap on investment in government security to 30 per cent of the outstanding stock of that security, from 20 per cent earlier.
“At the end of any day, all investments with residual maturity of up to one year will be reckoned for the 20 per cent limit,” the central banker’s official communiqué added.