What changed
The circular confirms that the percentage limits for FPI investment in government securities, state government securities, and corporate bonds remain at 6%, 2%, and 15% respectively for FY 2025-26. Absolute limits have been revised upward in two half-yearly tranches: for April-September 2025 and October-March 2026. The allocation of incremental G-Sec limit between General and Long-term sub-categories stays at 50:50, and the entire increase in SGS limits has been added to the General sub-category.
What it means for you
Banks and authorized dealers can expect continued FPI inflows into Indian debt markets with predictable limits. The unchanged percentage caps provide stability, while the phased increase in absolute limits offers a clear roadmap for liquidity management. The CDS limit of ₹2,93,612 crore allows FPIs to hedge credit risk, potentially deepening the corporate bond market.
What you must do
- Update internal systems with the new absolute FPI investment limits for each half-year of FY 2025-26.
- Inform FPI clients and constituents about the revised limits and the 50:50 split for G-Sec sub-categories.
- Monitor FPI utilization against the new limits to ensure compliance with regulatory caps.
- Review CDS transactions to ensure aggregate notional sold by FPIs stays within the 5% of outstanding corporate bonds limit.
Who it affects
Authorized Dealer Category-I banks, Foreign Portfolio Investors, Custodian banks handling FPI debt investments, Corporate bond issuers and market makers
Are the FPI investment limits for FY 2025-26 different from the previous year?
No, the percentage limits remain unchanged at 6% for G-Secs, 2% for SGSs, and 15% for corporate bonds. However, the absolute limits have been revised upward in two half-yearly tranches.
What is the new CDS limit for FPIs in FY 2025-26?
The aggregate notional amount of Credit Default Swaps sold by FPIs is set at 5% of the outstanding stock of corporate bonds, which translates to an additional limit of ₹2,93,612 crore for the year.
How are the incremental G-Sec limits allocated between sub-categories?
The allocation of incremental changes in the G-Sec limit remains at 50:50 between the 'General' and 'Long-term' sub-categories for FY 2025-26.