What changed
The circular confirms that FPI investment limits for government securities, state development loans, and corporate bonds remain at the same percentages of outstanding stocks as before. The allocation of incremental G-sec limit changes between General and Long-term sub-categories stays at 50:50, and the entire SDL limit increase goes to the General sub-category. The aggregate limit for CDS sold by FPIs is set at 5% of outstanding corporate bonds, with an additional limit of ₹2,22,623 crore for FY 2022-23.
What it means for you
Banks and authorized dealers can expect continued FPI participation in Indian debt markets without any tightening of overall limits, which supports stable capital inflows. The unchanged limits and sub-category allocations provide predictability for banks managing FPI investments and related compliance. The CDS limit increase offers FPIs more room to hedge credit risk, potentially boosting corporate bond market liquidity.
What you must do
- Update internal systems with the revised FPI investment limits for each half-year as per Table-1.
- Inform FPI clients and constituents about the unchanged percentage limits and sub-category allocations.
- Monitor FPI investments to ensure compliance with the 5% CDS notional limit on outstanding corporate bonds.
- Review and align reporting processes with the new absolute limit figures for G-secs, SDLs, and corporate bonds.
Who it affects
Authorized Dealer Category-I banks, Foreign Portfolio Investors, Custodian banks handling FPI debt investments, Market participants in government securities and corporate bonds
What are the FPI investment limits for FY 2022-23?
The limits remain unchanged: 6% of outstanding G-secs, 2% of outstanding SDLs, and 15% of outstanding corporate bonds. The absolute limits for each half-year are provided in Table-1 of the circular.
How is the G-sec limit split between General and Long-term sub-categories?
The incremental changes in the G-sec limit are allocated equally at 50:50 between the General and Long-term sub-categories for FY 2022-23.
What is the CDS sale limit for FPIs?
The aggregate notional amount of CDS sold by FPIs is capped at 5% of the outstanding stock of corporate bonds, with an additional limit of ₹2,22,623 crore set for FY 2022-23.