**Policy Summary: Investment by Foreign Portfolio Investors (FPI) in Debt – Review**
This circular, A.P. DIR Series Circular No. 33, issued by the Reserve Bank of India (RBI) on April 25, 2019, amends existing regulations concerning Foreign Portfolio Investor (FPI) investment in debt instruments in India. Specifically, it permits FPIs to invest in municipal bonds. This inclusion aims to broaden access for non-resident investors to the Indian debt market. FPI investment in municipal bonds will be included within the existing limits set for FPI investment in State Development Loans (SDLs). All other conditions for FPI investment in the debt market remain unchanged. The amendments to the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2017, Notification No. FEMA 20(R)/2017-RB dated November 07, 2017, were notified by the Government on April 18, 2019, and are annexed to the circular. These directions are issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999). Authorised Dealer Category-I (AD Category-I) banks are instructed to bring the contents of this circular to the attention of their customers/constituents. Further information can be obtained from T. Rabi Sankar, Chief General Manager, Reserve Bank of India.
Key Entities Referenced
Reserve Bank of India: The central bank of India, responsible for regulating the country's monetary policy and banking system.
Foreign Portfolio Investors: A class of investors who invest in financial assets of a country.
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 Transfer or Issue of Security by a Person Resident outside India Regulations, 2017: Regulations pertaining to the transfer or issue of security by individuals residing outside India.
Municipal Bonds: Debt securities issued by states, cities, counties and other governmental entities to fund public projects.
State Development Loans: Debt instruments issued by state governments in India to finance their developmental activities.
Authorised Dealer CategoryI banks: Banks authorized by the Reserve Bank of India to deal in foreign exchange.
India: The country where the policy is applicable.
भारतीय �रज़व र् ब�क
RESERVE BANK OF INDIA
www.rbi.org.in
RBI/2018-19/176
A.P. (DIR Series) Circular No. 33
April 25, 2019
To
All Authorised Persons
Madam / Sir
Investment by Foreign Portfolio Investors (FPI) in Debt - Review
Attention of Authorised Dealer Category-I (AD Category-I) banks is invited to Schedule 5 to the
Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside
India) Regulations, 2017 notified vide Notification No. FEMA 20(R)/2017-RB dated November
07, 2017, as amended from time to time and the relevant directions issued thereunder. A
reference is also invited to AP (DIR Series) Circular No. 22 dated April 6, 2018, AP (DIR Series)
Circular No.31 dated June 15, 2018, and AP (DIR Series) Circular No. 26 dated March 27, 2019
on FPI investments in debt instruments.
2. As a measure to broaden access of non–resident investors to debt instruments in India,
Foreign Portfolio Investors (FPI) are now permitted to invest in municipal bonds.
3. FPI investment in municipal bonds shall be reckoned within the limits set for FPI investment
in State Development Loans (SDLs).
4. All other existing conditions for investment by FPIs in the debt market remain unchanged.
5. AD Category-I banks may bring the contents of the circular to the notice of their
customers/constituents concerned.
6. Necessary amendments to Foreign Exchange Management (Transfer or Issue of Security by
a Person Resident outside India) Regulations, 2017 (Notification No. FEMA 20(R)/2017-RB
dated November 07, 2017) have been notified by the Government on April 18, 2019 and are
annexed to this circular.
17. 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 / approvals, if any, required under any other law.
Yours faithfully
(T. Rabi Sankar)
Chief General Manager
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