FII Investment in 'To Be Listed' Debt Securities Allowed
Current · Source: Reserve Bank of India · RBI/2011-12/423 · issued 01 Mar 2012 · ~2 min read
Quick answerRBI now permits FIIs to invest in primary issues of NCDs/bonds, provided listing occurs within 15 days. If not listed, FIIs must sell or the issuer must redeem/buyback. AD Category-I banks must inform customers.
The rule, in the simplest words
FIIs can invest in primary issues of NCDs/bonds that are 'to be listed' within 15 days.
If listing fails, FIIs must sell the securities and the issuer must redeem or buyback.
AD Category-I banks must inform customers about the new FII investment option.
How it plays out — a real example
A forex & trade-finance officer in Indore, Mr. Kumar, helps an Indian company issue NCDs to a SEBI-registered FII. The company promises to list the NCDs within 15 days. If the listing fails, the FII will sell the NCDs, and the company must redeem or buyback the securities. Mr. Kumar ensures that the offer document includes a clause requiring immediate redemption/buyback by the issuer if listing fails within 15 days.
What changed
Previously, FIIs could only invest in listed non-convertible debentures/bonds. Now, they can invest in primary issues of NCDs/bonds that are 'to be listed', subject to a mandatory listing within 15 days of investment. If listing fails, FIIs must immediately dispose of the securities, and the issuer must redeem or buyback.
What it means for you
This opens a new avenue for Indian companies to raise debt from FIIs through primary issuances, but with strict timelines. Banks facilitating such investments must ensure the 15-day listing condition is contractually enforced. Failure to list could trigger redemption obligations, impacting liquidity and compliance for issuers and investors.
What you must do
Inform all constituents and customers about the new FII investment option in primary NCDs/bonds with a 15-day listing commitment.
Ensure that offer documents for such securities include a clause requiring immediate redemption/buyback by the issuer if listing fails within 15 days.
Monitor compliance with the 15-day listing timeline and advise FII clients on disposal procedures if listing is delayed.
Update internal systems to track and report such investments as per FEMA regulations.
Who it affects
AD Category-I banks, SEBI-registered FIIs and their sub-accounts, Indian companies issuing NCDs/bonds, Issuers of debt securities
❓ Common questions
What happens if the NCDs/bonds are not listed within 15 days?
The FII must immediately sell the securities to a third party or to the issuer. The issuer is required to redeem or buyback the securities as per the terms of the offer.
Does this circular change the existing FEMA regulations?
Yes, necessary amendments to FEMA 20/2000-RB will be issued separately to incorporate this change. Until then, the circular's directions are effective under FEMA sections 10(4) and 11(1).
Who is responsible for ensuring the 15-day listing condition?
The issuer must commit to listing within 15 days, and the offer terms must include a clause for redemption/buyback if listing fails. AD Category-I banks should bring this to the notice of their customers.
📜 Read the original circular — full text as issued by RBI
RBI/2011-12/423
A.P. (DIR Series) Circular No. 89
March 01, 2012
To
All Category – I Authorised Dealer banks
Madam / Sir,
Foreign Institutional Investor (FII) investment in ‘to be listed’ debt securities
Attention of Authorised Dealer Category - I (AD Category-I) banks is invited to Regulation 5(4) and Schedule 5 of Notification No. FEMA 20/2000-RB dated May 3, 2000 , viz., Foreign Exchange Management (Transfer or issue of Security by a Person Resident outside India) Regulations, 2000, as amended from time to time, in terms of which the Securities and Exchange Board of India (SEBI) registered FIIs are allowed to invest only in listed non-convertible debentures (NCDs) / bonds issued by an Indian company.
2. SEBI has, vide their circular CIR/IMD/FIIC/18/2010 dated November 26, 2010, issued instructions on the revised allocation of investment limits to FIIs. In terms of paragraph 8 of the circular, SEBI has allowed FIIs to invest in ‘to be listed’ debt securities. Accordingly, it has been decided that SEBI registered FIIs/sub-accounts of FIIs can now invest in primary issues of Non-Convertible Debentures (NCDs)/ bonds only if listing of such bonds / NCDs is committed to be done within 15 days of such investment. In case the NCDs/bonds issued to the SEBI registered FIIs / sub-accounts of FIIs are not listed within 15 days of issuance to the SEBI registered FIIs / sub-accounts of FIIs, for any reason, then the FII/sub-account of FII shall immediately dispose of these bonds/NCDs either by way of sale to a third party or to the issuer and the terms of offer to FIIs / sub-accounts should contain a clause that the issuer of such debt securities shall immediately redeem / buyback the said securities from the FIIs/sub-accounts of FIIs in such an eventuality.
3.Necessary amendments to the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 notified vide Notification No. FEMA 20/2000-RB dated May 3, 2000 will be issued separately.
4. AD Category – I banks may bring the contents of this circular to the notice of their constituents and customers concerned.
5. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.
Yours faithfully,
(Meena Hemchandra)
Chief General Manager-in-Charge
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2011-12/423 · issued 01 Mar 2012. The plain-English explanation above is BankPulse’s own independent summary.
Update internal systems to track and report such investments as per FEMA regulations.
📜 Compliance
Inform all constituents and customers about the new FII investment option in primary NCDs/bonds with a 15-day listing commitment.
Ensure that offer documents for such securities include a clause requiring immediate redemption/buyback by the issuer if listing fails within 15 days.
Monitor compliance with the 15-day listing timeline and advise FII clients on disposal procedures if listing is delayed.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template
Example: if you are a Compliance officer at a bank this circular applies to (AD Category-I banks, SEBI-registered FIIs and their sub-accounts, Indian companies issuing NCDs/bonds, Issuers of debt securities), your first concrete step on “FII Investment in 'To Be Listed' Debt Securities Allowed” is: “Inform all constituents and customers about the new FII investment option in primary NCDs/bonds with a 15-day listing commitment.” (RBI issued this 01 Mar 2012).
Circular: RBI/2011-12/423 -- FII Investment in 'To Be Listed' Debt Securities Allowed
Issued: 01 Mar 2012
Action required: Inform all constituents and customers about the new FII investment option in primary NCDs/bonds with a 15-day listing commitment.
Action required: Ensure that offer documents for such securities include a clause requiring immediate redemption/buyback by the issuer if listing fails within 15 days.
Action required: Monitor compliance with the 15-day listing timeline and advise FII clients on disposal procedures if listing is delayed.
Action required: Update internal systems to track and report such investments as per FEMA regulations.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
💬 Banker Discussion
Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.
BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=7036&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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