RBI eases debt market rules for FPIs

Mumbai: RBI has eased investment restrictions for foreign portfolio investors in the corporate debt market . This move is likely to deepen market liquidity and align India more closely with global capital flows. RBI announced it will remove both the short-term investment cap and the concentration limit that previously applied to FPIs investing through the general route .

Under the earlier framework, FPIs could only invest in corporate bonds with a residual maturity of more than one year. Their holdings were also capped at 50% of any single issuance, with tighter limits based on investor type.

These constraints, designed to mitigate concentration risk and discourage speculative flows, did not apply to the voluntary retention route, a separate channel with lock-in conditions.

The removal of these restrictions grants foreign investors greater freedom to deploy capital tactically. FPIs can now hold a larger share of individual bond issues and invest freely across the maturity curve, including in paper with less than one year to maturity.