Ř
No Tax on Capital Gains and Interest in GSec for FPI
·
The
Reserve Bank of India has amended the regulatory framework governing
investments by Foreign Portfolio Investors (FPIs) in Government Securities
through the General Route.
·
To
improve ease of investment, RBI has withdrawn
three key restrictions on FPI investments in Government
Securities under the General Route:
o Short-term investment limit
o Security-wise limit
o Concentration limit
·
RBI
has merged the existing 'general'
and 'long-term' investment categories into a single investment
limit for:
o Central Government Securities (G-Secs)
o State Government Securities (SGSs)
|
Period |
Central
Government Securities (₹ Crore) |
State
Government Securities (₹ Crore) |
|
Apr–Sep
2026 |
4,62,490 |
1,53,043 |
|
Oct
2026–Mar 2027 |
4,77,006 |
1,64,242 |
RBI
has designated additional securities as 'specified
securities' under the Fully Accessible Route (FAR):
New Government Security Issuances
·
All
new 15-year, 30-year and 40-year Government Securities.
New Sovereign Green Bond Issuances
·
All
new issuances in:
o 5-year
o 7-year
o 10-year
o 15-year
o 30-year
o 40-year tenors.
|
ISIN |
Security |
|
IN0020250042 |
6.68% GS 2040 |
|
IN0020250075 |
7.24% GS 2055 |
|
IN0020260033 |
7.71% GS 2066 |
The
following provisions have been removed from the RBI Master Direction:
·
Definition
of "Long-Term FPIs"
·
Definition
of "Short-Term Investments"
·
Short-term
investment limit of 30%
·
Security-wise
investment cap of 30% in a Government Security
·
Concentration
limits of 10%/15% applicable to FPIs and related FPIs
·
The
Clearing Corporation of India Ltd. (CCIL) will continue monitoring overall FPI
utilisation of investment limits in Central and State Government Securities.
·
Monitoring
of the abolished security-wise investment limit has been discontinued.
·
The
revised framework came into effect immediately
from 5 June 2026.
·
The
reforms simplify investment procedures for foreign investors.
·
Greater
flexibility is expected to improve foreign participation in India's government
bond market.
·
Expanded
FAR eligibility increases unrestricted access for overseas investors to
long-tenor government securities and sovereign green bonds.
[A.P. (DIR Series)
Circular No. 11 dated June 05, 2026]
Attention of Authorised Dealer Category-I (AD Category-I) banks is invited to the 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; the Master Direction
- Reserve Bank of India (Non-resident Investment in Debt
Instruments) Directions, 2025 dated January 07, 2025 [hereinafter, ‘Master Direction’]; and A.P. (DIR Series) Circular No. 05 dated April 06, 2026.
2. At present,
investments by Foreign Portfolio
Investors (FPIs) in Government Securities
through the General Route
are subject
to (i) short-term investment limit, (ii) security-wise limit, and (iii) concentration limit. On a review, and with a view to providing
greater ease of investment to FPIs, it has been decided
to withdraw the requirement for FPIs to comply with the above three limits,
for their investments in Government
securities under the General Route.
3. It has also been decided to merge the sub-categories of investment limits, viz., 'general' and 'long-term' into a single
limit for investment in Central Government Securities and State Government Securities (SGSs), respectively. The limits notified for investment
in Central
Government securities and SGSs for the financial year 2026-27 vide A.P. (DIR Series)
Circular No. 05 dated April 6, 2026, shall accordingly be
modified as under:
|
Investment
limits for
FY 2026-27 |
||
|
all figures in ₹ Crore |
||
|
|
Central Government Securities |
State Government Securities |
|
Limit for the HY Apr 2026 – Sep 2026 |
4,62,490 |
1,53,043 |
|
Limit for the HY Oct 2026 –
Mar 2027 |
4,77,006 |
1,64,242 |
4. In addition,
it has been decided to additionally designate the following instruments as ‘specified securities’ under the Fully
Accessible Route (FAR):
a) Government Securities: All new issuances in 15-year, 30-year, and 40-year tenors.
b) Sovereign Green Bonds: All new issuances in 5-year, 7-year, 10-year, 15- year, 30-year, and
40-year tenors.
c) Existing Securities: Those listed in the table below.
|
Table:
Additional
‘specified securities’
under the
FAR |
||
|
Sr. No. |
ISIN |
Security |
|
1 |
IN0020250042 |
6.68% GS 2040 |
|
2 |
IN0020250075 |
7.24% GS 2055 |
|
3 |
IN0020260033 |
7.71% GS 2066 |
5. The directions in this circular come into effect immediately. The updated Master Direction is enclosed herewith (the changes
are tabulated in the Annex).
6. AD Category-I banks may bring the contents of these directions to the notice of their constituents.
7. The directions contained in this Circular have been issued under sections 10(4) and 11(1) of
the Foreign Exchange Management Act, 1999 (42
of 1999) without
prejudice to permissions/approval,
if any,
required under any other law.
|
Sr. No |
Existing Directions |
Revised/Additional Directions |
|
Sub-clause (g) of clause (i) of paragraph
2 shall be omitted. |
||
|
(i) |
“Long-Term FPIs”
shall
mean
Sovereign
Wealth
Funds,
Multilateral
Agencies, Pension / Insurance / Endowment Funds and
foreign Central
Banks. |
- |
|
Sub-clause (s) of clause (i) of paragraph
2 shall be omitted. |
||
|
(ii) |
“Short-term Investments” shall mean
investments with residual
maturity
up to one
year. |
- |
|
Clause (i) of paragraph 4.3 shall
be omitted. |
||
|
(iii) |
Minimum residual maturity requirement: An FPI may invest
in Central Government Securities (including Treasury Bills) and State Government Securities without any minimum residual maturity
requirement. |
- |
|
Clause (ii) of paragraph
4.3 shall be omitted. |
||
|
(iv) |
Short-term investment limit:
Investments by an FPI in Central Government Securities (including Treasury Bills) and State Government Securities with residual maturity upto one year shall
not exceed 30 per cent of the total investment of the FPI in each category. The short-term investment limit shall apply on investments on an end-of-day
basis. Provided that the limit shall not
apply: (a) If the short-term investments of an FPI consist
entirely of investments made on or
before April 27, 2018;
and |
- |
|
|
(b) To investments by an FPI
made between July 08, 2022 and October
31, 2022 (both dates
included). |
|
|
Clause (iii) of paragraph
4.3 shall be omitted. |
||
|
(v) |
Security-wise limit: Investments by FPIs and investments made through the Special
Rupee Vostro Account Route, in aggregate, in any Central Government Security shall not exceed
30 per cent
of the outstanding
stock of the Security. |
- |
|
Clause (iv) of paragraph
4.3 shall be omitted. |
||
|
(vi) |
Concentration limit: Investment in Central Government
Securities and State Government
Securities by an FPI (including its related FPIs) shall not exceed
15 per cent of prevailing investment limit for each category in case of long-term FPIs and 10 per cent of prevailing
investment limit for other
FPIs. |
- |
|
The phrase “as well
as the security-wise limit for investment in Central Government securities”
shall be omitted
from clause (vi) of paragraph 4.3. |
||
|
(vii) |
The Clearing Corporation of India Ltd. (CCIL)
shall monitor the utilisation of the investment limits for FPI investment in Central Government Securities and State
Government Securities as well as the security-wise limit for investment in Central Government Securities. |
The Clearing Corporation
of India Ltd. (CCIL) shall monitor the utilisation of the investment limits for FPI investment in Central Government Securities and State Government Securities. |
|
Clause (i) of paragraph 6.2 shall be
substituted. |
||
|
(viii) |
All securities included
under the FAR on the date of issuance of these
Directions (as set out in Annex
– 3); all new issuances of 5-year,
7-year and 10-year
tenors by the Central
Government; and any
other security that the Reserve
Bank may notify
in this regard. |
All securities
included under the FAR as set
out in Annex – 3; all new issuances of 5-year, 7-year, 10-year,
15-year, 30-year and 40-year tenors by the Central Government (including new issuances of Sovereign Green Bonds in these tenors); and any other security that
the Reserve Bank may notify in this regard. |
|
The proviso to
clause (i) of paragraph 7A.4 shall be
omitted. |
||
|
(ix) |
7A.4. Investments in Central Government Securities (including Treasury Bills) other
than the ‘specified securities’ included under the
FAR shall be in terms
of the following: i. The investments shall be subject to the
investment limit and stipulations specified for FPI investments under the General
Route as set out in paragraph 4.2 and 4.3 of these
Directions respectively. Provided that the short-term investment limit, as set out in paragraph 4.3 (ii) of these
Directions, shall not apply to investments made under the SRVA route. |
7A.4. Investments in
Central Government Securities (including Treasury Bills) other
than the ‘specified securities’ included under the FAR shall be in terms
of the following: i. The investments shall be subject to the investment limit and stipulations specified for FPI investments under the General Route as set out in paragraph 4.2 and 4.3 of these Directions respectively. |