What changed
The investment limits for FPIs in government securities, state government securities, and corporate bonds remain unchanged as percentages of outstanding stock for FY 2026-27. The allocation of incremental G-Sec limit changes between General and Long-term sub-categories stays at 50:50. All Voluntary Retention Route investments are now subject to General Route limits effective April 1, 2026.
What it means for you
Banks and lenders can expect stable FPI participation in debt markets with no change in percentage limits, though absolute limits have increased due to growth in outstanding stock. The absorption of VRR into General Route simplifies compliance but may reduce flexibility for FPIs seeking longer-term commitments. The additional CDS limit of ₹3,30,464 crore provides more hedging opportunities for corporate bond investors.
What you must do
- Update internal systems with revised absolute FPI debt limits for both half-years of FY 2026-27 as per Table 1.
- Inform AD Category-I bank clients about the withdrawal of the previous circular and the new limits.
- Monitor FPI investments under VRR to ensure they comply with General Route limits from April 1, 2026.
- Track the additional CDS notional limit of ₹3,30,464 crore for corporate bonds and advise FPIs accordingly.
Who it affects
AD Category-I banks, Foreign Portfolio Investors, Debt market participants, Custodians and clearing houses
What are the new FPI investment limits for FY 2026-27?
The limits remain at 6% for G-Secs, 2% for SGSs, and 15% for corporate bonds of outstanding stock. Absolute limits are provided in Table 1 of the circular.
How does the Voluntary Retention Route change affect FPIs?
From April 1, 2026, all VRR investments are subject to General Route limits, meaning they count against the same caps as other FPI debt investments.
What is the CDS limit for FPIs in FY 2026-27?
The aggregate notional amount of CDS sold by FPIs is capped at 5% of outstanding corporate bonds, with an additional limit of ₹3,30,464 crore for the year.