The Reserve Bank of India (RBI) has announced the withdrawal of two key restrictions governing investments by foreign portfolio investors (FPIs) in corporate debt securities through the general route, with immediate effect.
In a circular issued by the Financial Markets Regulation Department, the RBI stated that FPIs will no longer be required to comply with the short-term investment limit and the concentration limit as prescribed in earlier directions.
The short-term investment limit refers to the cap on the portion of FPI investments in debt instruments that mature within one year. It was intended to discourage volatile, short-duration foreign inflows.
The concentration limit restricted the extent to which an FPI could invest in the debt instruments of a single corporate issuer to reduce the risk of overexposure. By withdrawing these limits, the RBI aims to provide greater ease of investment for FPIs.
The changes have been made with immediate effect. All authorised dealer category-I (AD category-I) banks — lenders authorised to deal in foreign exchange — have been instructed to bring the contents of the circular to the notice of their constituents.
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(Edited by : Shoma Bhattacharjee)
