What changed
The additional limit for FII investment in listed non-convertible debentures/bonds issued by infrastructure companies (residual maturity 5+ years) was increased by USD 20 billion, from USD 5 billion to USD 25 billion. The total limit for listed non-convertible debentures/bonds now stands at USD 40 billion, with a sub-limit of USD 25 billion for infrastructure sector debt. A minimum lock-in period of three years has been introduced for such investments, though FIIs can trade among themselves during this period. Additionally, FIIs are now permitted to invest in unlisted non-convertible debentures/bonds issued by infrastructure corporates under the same terms.
What it means for you
This move significantly expands the pool of foreign capital available for Indian infrastructure companies, potentially lowering their borrowing costs and easing access to long-term debt. For banks and lenders, increased FII participation in corporate bonds could reduce pressure on bank credit for infrastructure projects and improve liquidity in the secondary bond market. The lock-in period ensures stability in long-term funding, while inter-FII trading maintains some flexibility. Banks should prepare for higher volumes of FII transactions in infrastructure debt and ensure compliance with the new limits and lock-in requirements.
What you must do
- Update internal systems to reflect the new FII investment limits: USD 40 billion total corporate debt, with USD 25 billion sub-limit for infrastructure sector debt.
- Ensure all FII transactions in infrastructure non-convertible debentures/bonds comply with the 3-year lock-in period and allow inter-FII trading.
- Advise clients and constituents about the enhanced limits and the new eligibility for unlisted infrastructure debt investments.
- Monitor FII investment flows to avoid breaching the revised caps and report any discrepancies to RBI as per existing guidelines.
Who it affects
All Category-I Authorised Dealer banks, SEBI-registered Foreign Institutional Investors (FIIs), Indian companies in the infrastructure sector issuing non-convertible debentures/bonds, Corporate debt market participants and custodians
What is the new total limit for FII investment in listed non-convertible debentures/bonds?
The total limit for FII investment in listed non-convertible debentures/bonds is now USD 40 billion, with a sub-limit of USD 25 billion for infrastructure sector debt (residual maturity 5+ years).