What changed
Previously, FPIs investing in corporate debt via the General Route had to adhere to short-term investment limits and concentration limits as per the Master Direction. RBI has now removed both these requirements, effective May 8, 2025, to ease FPI participation.
What it means for you
Banks and lenders can expect increased FPI demand for corporate bonds, potentially lowering borrowing costs for corporates. AD Category-I banks must update their internal processes and inform clients about the relaxed norms, as compliance burden reduces.
What you must do
- Update internal systems and documentation to reflect removal of short-term and concentration limits for FPI corporate debt investments.
- Communicate the relaxation to your corporate clients and FPI constituents to attract more investments.
- Monitor FPI flows into corporate bonds to assess impact on liquidity and pricing.
- Ensure adherence to other existing FPI investment regulations under FEMA.
Who it affects
AD Category-I banks, Foreign Portfolio Investors (FPIs), Corporate bond issuers, Custodian banks
What specific limits have been removed?
The short-term investment limit and the concentration limit that were previously applicable to FPI investments in corporate debt securities under the General Route have been withdrawn.
When does this change take effect?
The circular is issued with immediate effect from May 8, 2025.
Do other FPI investment rules still apply?
Yes, other provisions of the Master Direction and FEMA regulations remain in force unless specifically amended.