What changed
RBI expanded QFI investment scope to include corporate debt securities (listed NCDs, bonds, mutual fund debt schemes, and to-be-listed corporate bonds) on a repatriation basis. Previously, QFIs could only invest in mutual fund units and equity shares. The new circular also simplifies account structure: QFIs now use a single non-interest bearing rupee account with an AD Category-I bank (operated by the QDP) instead of a separate pool account, and a single demat account with a QDP for all eligible securities.
What it means for you
Banks acting as AD Category-I must facilitate QFI investments by opening and maintaining single non-interest bearing rupee accounts for each QFI, linked to their QDP. This streamlines operations and reduces administrative burden. The USD 1 billion sub-limit for QFI corporate debt is separate from the USD 20 billion FII limit, offering banks a new avenue to service foreign portfolio flows into Indian debt markets.
What you must do
- Update internal procedures to open single non-interest bearing rupee accounts for QFIs, operated by SEBI-registered QDPs.
- Ensure compliance with the USD 1 billion overall ceiling for QFI corporate debt investments, monitoring against the FII USD 20 billion limit.
- Verify that QFIs maintain only one demat account with a QDP for all eligible securities (equity, mutual funds, debt).
- Process inward remittances and repatriation (net of taxes) through the single rupee account for QFI transactions in eligible debt securities.
Who it affects
AD Category-I banks, Qualified Depository Participants (QDPs), Qualified Foreign Investors (QFIs), Indian companies issuing listed or to-be-listed corporate bonds/NCDs, Mutual funds offering debt schemes
What is the total investment limit for QFIs in corporate debt under this circular?
The overall ceiling is USD 1 billion, which is over and above the USD 20 billion limit for FII investment in corporate debt.
Can a QFI open multiple rupee accounts for different types of investments?
No. Each QFI must maintain only one single non-interest bearing Rupee Account with an AD Category-I bank for all eligible securities (mutual funds, equity, and debt).
Are QFIs allowed to invest in unlisted corporate bonds?
Yes, but only in 'to be listed' corporate bonds, subject to the same 15-day listing requirement applicable to FIIs as per earlier circulars.