RBI raises investment limit for FPIs in debt

According to the current norms, short-term investments by a foreign portfolio investor (FPI) should not exceed 20 per cent of the total investment of that FPI in either central government securities (including treasury bills) or state development loans.

Mumbai:The Reserve Bank of India on Thursday raised the investment limit for FPIs in government and corporate bonds, a move that is likely to bring in more foreign funds in the country.

According to the current norms, short-term investments by a foreign portfolio investor (FPI) should not exceed 20 per cent of the total investment of that FPI in either central government securities (including treasury bills) or state development loans.

The same norms are applicable to investments in corporate bonds.

The short-term investment limit has now been increased from 20 per cent to 30 per cent in both the cases, the RBI said in a circular.

Meanwhile, the RBI has also made relaxation in the voluntary retention route (VRR) for FPI investments in debt.

The investment cap through VRR has been doubled to Rs 1.5 lakh crore, the RBI said in another circular.

"FPIs that have been allotted investment limits under VRR may, at their discretion, transfer their investments made under the general investment limit to VRR," the bank said.

FPIs are also allowed to invest in exchange-traded funds that invest only in debt instruments, it added.