Short Term Investment Limit for FPI Increased
to 30% from 20%
[A.P. (DIR Series) Circular
No.18 (RBI/2019-20/150) dated January 23, 2020]
Sub:
Investment by Foreign Portfolio Investors (FPI) in Debt
Attention
of Authorised Dealer Category-I (AD Category-I) banks
is invited to Foreign Exchange Management (Debt Instruments) Regulations, 2019
notified vide Notification No. FEMA. 396/2019-RB
dated October 17, 2019, as amended from time to time, and the
relevant directions issued thereunder. A reference is also invited to the A.P.
(DIR Series) Circular
No. 31 dated June 15, 2018 (hereinafter, Directions) read with A.P. (DIR
Series) Circular No. 19 dated February 15, 2019.
2.
On a review, the following changes are made to the Directions: -
a) In terms of paragraph 4(b) (i) of the Directions, short-term investments by an FPI
shall not exceed 20% of the total investment of that FPI in either Central
Government Securities (including Treasury Bills) or State Development Loans.
This short-term investment limit is hereby increased from 20% to 30%.
b) In terms of paragraph 4(b) (ii) of the
Directions, short-term investments by an FPI shall not exceed 20% of the total
investment of that FPI in corporate bonds. This short-term investment limit is
hereby increased from 20% to 30%.
c) FPI investments in Security Receipts are
currently exempted from the short-term investment limit (paragraph 4 (b)(ii)) and the issue limit (paragraph 4(f)(iii)). These
exemptions shall also extend to FPI investments in the following securities:
i. Debt instruments issued by Asset
Reconstruction Companies; and
ii. Debt instruments issued by an entity under
the Corporate Insolvency Resolution Process as per the resolution plan approved
by the National Company Law Tribunal under the Insolvency and Bankruptcy Code,
2016
3.
The updated Directions are
attached.
4.
These directions are issued under sections 10(4) and 11(1) of the Foreign Exchange
Management Act, 1999 (42 of 1999) and are without prejudice to permissions/
approvals, if any, required under any other law.