IMPLEMENTATION LEVEL

National

AFFECTED FLOW

Inflow

ANNOUNCED AS TEMPORARY

No

NON-TRADE-RELATED RATIONALE

No

ELIGIBLE FIRMS

all

JUMBO

No

TARIFF PEAK

No
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Inception date: 01 May 2018 | Removal date: open ended
Still in force

Controls on commercial transactions and investment instruments

On 1 May 2018, the Reserve Bank of India through "RBI/2017-18/170 A.P. (DIR Series) Circular No. 26" issued certain clarifications with regards to Circular No. 24 issued on 27 April 2018, which amended the policy for investments by Foreign Portfolio Investors in debt (see related State Act). 

  • FPIs are allowed to invest in corporate bonds with a residual maturity of at least 1 year. However, it is now specified that investments by an FPI in corporate bonds with a residual maturity of less than 1 year shall not, at any point of time, exceed 20% of the total investments of that FPI in corporate bonds.
  • The requirement of a 20% cap on investments in debt of a residual maturity of less than 1 year is applicable for debt instruments and will be monitored on a continuous basis, regardless of the maturity of the security at the time of purchase by the FPI 
  • In case investments as on 2 May 2018 exceed the above limit, the FPI will not be allowed to make further additions to the portfolio with securities of maturity less than 1 year and the FPI will have 6 months to bring the share of investments below 20%
  • FPIs are now permitted to invest in Treasury Bills of the Central Government
  • In Circular No. 24, limits for investments were set for FPIs and its related FPIs. It has been clarified that related FPIs refers to all FPIs registered by the same non-resident entity.
  • In Circular No. 24, limits were also specified for the aggregate investment by an FPI in a corporate and its related entities. The entities related to a corporate have been clarified to have the meaning as defined under Section 2(76) of the Indian Companies Act, 2013.

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