This circular, RBI/2018-19/152 A.P. (DIR Series) Circular No. 26, issued by the Reserve Bank of India (RBI) on March 27, 2019, addresses investments by Foreign Portfolio Investors (FPI) in government securities under the Medium Term Framework. It revises the investment limits for FY 2019-20.
The circular stipulates that FPI investment limits will be 6% of outstanding Central Government securities (G-secs), 2% of outstanding State Development Loans (SDLs), and 9% of outstanding corporate bonds. The increase in the G-sec limit is allocated with a 50:50 split between the "General" and "Long-term" sub-categories. The entire increase in SDL limits is allocated to the "General" sub-category. The coupon reinvestment arrangement previously available for G-secs is extended to SDLs.
The revised limits, in Rupees billion, are detailed in Table 1 of the circular. For G-secs, the General category limits are ₹2,347 billion for HY Apr-Sep, 2019 and ₹2,461 billion for HY Oct 2019-March, 2020; the Long Term category limits are ₹1,037 billion and ₹1,151 billion for the same periods respectively. For SDLs, the General category limits are ₹497 billion and ₹612 billion for the same periods respectively, while the Long Term category remains constant at ₹71 billion. The corporate bond limits are ₹3,031 billion and ₹3,170 billion respectively. The total debt limits are ₹6,983 billion and ₹7,465 billion respectively.
Authorised Dealer Category-I (AD Category-I) banks are instructed to bring the contents of this circular to the attention of their constituents and customers. The directions within the circular are issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 and do not override any other legal requirements.
For further information, contact the Financial Markets Regulation Department, Central Office, 1st Floor, Main Building, Shahid Bhagat Singh Marg, Fort, Mumbai – 400001. Telephone: +91 22 2260 3000. Fax: +91 22 2270 2290. Email: cgmfmrdrbi.org.in. The circular is signed by T. Rabi Sankar, Chief General Manager.
Key Entities Referenced
Foreign Portfolio Investors: Refers to investors investing in financial assets of a country.
Government Securities: Debt instruments issued by a government to support government spending.
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 a person resident outside India.
Central Government Securities: Debt instruments issued by the central government.
State Development Loans: Debt instruments issued by state governments.
Mumbai, Maharashtra: City in India where the Financial Markets Regulation Department, Central Office of RBI is located.
Reserve Bank of India: India's central bank responsible for regulating the country's monetary policy.
RBI/2018-19/152
A.P. (DIR Series) Circular No. 26 March 27, 2019
To,
All Authorised Persons
Madam / Sir
Investment by Foreign Portfolio Investors (FPI) in Government Securities
Medium Term Framework
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 on the captioned
subject.
2. Revision of investment Limits for 2019-20
a. The limit for FPI investment in Central Government securities (G-secs), State
Development Loans (SDLs) and corporate bonds shall be 6%, 2%, and 9% of
outstanding stocks of securities, respectively, in FY 2019-20.
b. The allocation of increase in G-sec limit over the two sub-categories – ‘General’ and
‘Long-term’ – has been set at 50:50 for the year 2019-20. The entire increase in limits for
SDLs has been added to the ‘General’ sub-category of SDLs.
c. In terms of para 3 (g) of the circular dated April 06, 2018, the coupon reinvestment
arrangement for G-secs shall be extended to SDLs.
�वत्तीय बाज़ार �व�नयमन �वभाग,क�द्र�य कायार्लय, पहल� मंिजल, मुख्य भवन,शह�द भगत �सहं माग,र् फोटर्,मुंबई–400001.भारत
फोन: (91-22) 2260 3000,फैक्स: (91-22) 22702290 ई-मेल: cgmfmrd@rbi.org.in
Financial Markets Regulation Department, Central Office, 1st Floor, Main Building, Shahid Bhagat Singh Marg, Fort, Mumbai – 400001. India
Tel: (91-22) 2260 3000, Fax: (91-22) 22702290 e-mail- cgmfmrd@rbi.org.in
िहन्दी आसान है इसका प्रयोग बढ़ाइए
,3. Accordingly, the revised limits for the various categories, after rounding off, would be as
under (Table 1):
Table 1 - Revised Limits for FPI Investment in Debt - 2019-20 (Rupees billion)
G-Sec - G-Sec - SDL - SDL - Corporate Total
General Long General Long Bonds Debt
Term Term
Current Limit 2,233 923 381 71 2,891 6,499
Revised Limit for the
2,347 1,037 497 71 3,031 6,983
HY Apr-Sep, 2019
Revised Limit for the
HY Oct 2019-March, 2,461 1,151 612 71 3,170 7,465
2020
4. 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.
Yours faithfully
(T. Rabi Sankar)
Chief General Manager