**Summary:**
This circular, A.P. DIR Series Circular No. 07, issued by the Reserve Bank of India (RBI) on July 07, 2022, pertains to relaxations in the regulatory regime for investments by Foreign Portfolio Investors (FPIs) in debt instruments, following the press release on Liberalisation of Forex Flows dated July 06, 2022.
The circular amends the Foreign Exchange Management (Debt Instruments) Regulations, 2019 and A.P. DIR Series Circular No. 31 dated June 15, 2018. Specifically, it addresses the stipulations regarding short-term investments by FPIs in government securities (including Treasury Bills and State Development Loans) and corporate bonds, which were previously limited to 30% of an FPI's total investment in any category.
The key changes are:
1. Investments made by FPIs in government securities and corporate bonds between July 08, 2022, and October 31, 2022 (inclusive) will be exempted from the 30% limit on short-term investments until maturity or sale.
2. FPIs are now permitted to invest in commercial papers and non-convertible debentures with an original maturity of up to one year during the period between July 08, 2022, and October 31, 2022 (inclusive). These investments will also be exempted from the limit on short-term investments until maturity or sale.
The circular, issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999, is effective immediately. AD Category-I banks are instructed to bring the contents of the circular to the notice of their constituents and customers.
For further information, contact the Financial Markets Regulation Department, Central Office Building, 9th Floor, Shahid Bhagat Singh Marg, Fort, Mumbai – 400001. Phone: 91-22-2260 1000, Fax: 91-22-22702290, Email: cgmfmrdrbi.org.in. The circular was issued by Dimple Bhandia, Chief General Manager, RBI.
Key Entities Referenced
Reserve Bank of India: The central bank of India, responsible for regulating the country's monetary policy and financial system.
Foreign Portfolio Investors: Investors who invest in financial assets of a country, such as stocks and bonds, without directly managing the assets.
Authorised Dealer Category-I banks: Banks authorized by the Reserve Bank of India to deal in foreign exchange.
Medium-Term Framework: A regulatory framework related to foreign exchange flows, as referenced in the press release dated July 06, 2022.
Foreign Exchange Management Act, 1999: An Act of the Parliament of India to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India.
Foreign Exchange Management Debt Instruments Regulations, 2019: Regulations pertaining to debt instruments under the Foreign Exchange Management Act.
Central Government securities: Debt instruments issued by the central government.
State Development Loans: Debt instruments issued by the State Governments in India to finance their developmental activities.
RESERVE BANK OF INDIA
www.rbi.org.in
RBI/2022-23/87
A.P. (DIR Series) Circular No.07 July 07, 2022
To
All Authorised Persons
Madam/Sir,
Investment by Foreign Portfolio Investors (FPI) in Debt - Relaxations
Attention of Authorised Dealer Category-I (AD Category-I) banks is invited to the paragraph 3
of the press release on “Liberalisation of Forex Flows” dated July 06, 2022 regarding
relaxations in the regulatory regime under the Medium-Term Framework. A reference is also
invited to:
a) 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, and the relevant directions issued thereunder; and
b) the A.P. (DIR Series) Circular No. 31 dated June 15, 2018 (hereinafter, Directions),
as amended from time to time.
2. In terms of paragraphs 4(b)(i) and 4(b)(ii) of the Directions, short-term investments by an
FPI in government securities (Central Government securities, including Treasury Bills and
State Development Loans) and corporate bonds shall not exceed 30% of the total investment
of that FPI in any category. It has been decided that investments by FPIs in government
securities and corporate bonds made between July 08, 2022 and October 31, 2022 (both dates
included) shall be exempted from the limit on short-term investments till maturity or sale of
such investments.
3. In terms of paragraph 4(b)(ii) of the Directions, FPI investments in corporate bonds were
subject to a minimum residual maturity requirement of one year. It has been decided to allow
FPIs to invest in commercial papers and non-convertible debentures with an original maturity
of up to one year, during the period between July 08, 2022 and October 31, 2022 (both dates
included). These investments shall be exempted from the limit on short-term investments till
maturity or sale of such investments.
�वत्तीय बाज़ार �व�नयमन �वभाग,क�द्र�य कायार्लय भवन, नौवीं मंिजल, शह�द भगत �सहं माग,र् फोटर्, मुंबई–400001.भारत
फोन: (91-22) 2260 1000,फैक्स: (91-22) 22702290 ई-मेल: cgmfmrd@rbi.org.in
Financial Markets Regulation Department, Central Office Building, 9th Floor, Shahid Bhagat Singh Marg, Fort, Mumbai – 400001. India
Tel: (91-22) 2260 1000, Fax: (91-22) 22702290 e-mail- cgmfmrd@rbi.org.in
�हन्द� आसान है, इसका प्रयोग बढ़ाइए4. AD Category – I banks may bring the contents of this circular to the notice of their
constituents and customers concerned.
5. 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) and are without prejudice to
permissions/approval, if any, required under any other law.
6. These Directions shall be applicable with immediate effect.
Yours faithfully,
(Dimple Bhandia)
Chief General Manager
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