Ease of Norms for Investment by Foreign Portfolio Investors in Debt

RBI had on 23^rd day of January 2020 vide its A.P. (DIR Series) Circular No.18 has eased the norms for investment by Foreign Portfolio Investors (FPIs) in Debt. These directions are issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999. The amendments are listed as under:

1. a) The limit of short-term investments by an FPI in either Central Government Securities (including Treasury Bills) or State Development Loans without any minimum residual maturity requirement has been increased from 20% to 30% of the total investment of that FPI.
2. b) The limit of short-term investments by an FPI in corporate bonds with minimum residual maturity of above one year has been increased from 20% to 30% of the total investment of that FPI.
3. c) Investments by FPI in Security Receipts are currently exempted from the short-term investment limit. These exemptions have now been extended to FPI investments in the following securities:
4. Debt instruments issued by Asset Reconstruction Companies; and
5. Debt instruments issued by an entity under the Corporate Insolvency Resolution Process as per the resolution plan approved by the National Company Law Tribunal under the Insolvency and Bankruptcy Code, 2016.

The text of the RBI circular can be viewed at below link: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11797&Mode Last Updated: 31^st January 2020 This article is contributed by:  Luv Malhotra Senior Manager, Legal

Tag: Foreign Investment, Investments, RBI