What changed
The sub-limit for foreign investment in Commercial Papers (CP) was reduced from USD 3.5 billion to USD 2 billion, a cut of USD 1.5 billion. The overall corporate debt limit stays at USD 51 billion, with the freed amount now available for investment in other corporate debt instruments.
What it means for you
Banks and lenders can expect reduced foreign demand for CPs, potentially easing competition for short-term paper. The shift encourages long-term foreign investment in broader corporate debt, which may improve liquidity for bonds and NCDs. AD Category-I banks must update their internal limits and advise clients on the revised CP cap.
What you must do
- Update internal systems to reflect the new CP sub-limit of USD 2 billion for eligible foreign investors.
- Inform corporate clients and constituents about the reduced CP investment ceiling and the unchanged overall corporate debt limit.
- Monitor SEBI operational guidelines for any further compliance requirements.
- Ensure that all foreign investment transactions in CPs adhere to the revised sub-limit.
Who it affects
AD Category-I banks, FIIs, QFIs, and long-term investors (SWFs, pension funds, etc.), Indian companies issuing Commercial Papers, Corporate debt market participants
What is the new CP sub-limit for foreign investors?
The CP sub-limit has been reduced from USD 3.5 billion to USD 2 billion, effective immediately.
Does the overall corporate debt limit change?
No, the total corporate debt limit remains at USD 51 billion. The freed USD 1.5 billion is now available for investment in other corporate debt instruments.
Who issued the operational guidelines for this change?
SEBI will issue the operational guidelines for implementing the revised limits.