The Reserve Bank of India (‘RBI’) and the Securities Exchange Board of India (‘SEBI’) have reviewed the cap placed w.r.t investment by FPI in Debt securities. Both the Regulators had, mandated that no FPI shall have an exposure of more than 20% of its corporate bond portfolio to a single corporate (including exposure to related parties of corporate as defined under section 2(76)(viii) of Companies Act, 2013). This cap has been withdrawn by RBI on 15 February 2019, and SEBI followed suit with its circular dated 12 March 2019.
In this regard, RBI has said in its monetary policy review that, “While the provision was aimed at incentivising FPIs to maintain a portfolio of assets, further market feedback indicates that FPIs have been constrained by this stipulation. In order to encourage a wider spectrum of investors to access the Indian corporate debt market, it is now proposed to withdraw this provision.”
In respect of investments in the debt securities, the FPI will still have to comply with the any other directions of RBI. Any non-compliance with the requirements prescribed by RBI from time to time w.r.t corporate debt securities shall be liable for action in terms of SEBI (Foreign Portfolio Investors) Regulations, 2014.
Click here to read the SEBI Circular, and here to read the RBI Circular
