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RBI/2016-17/138
A.P. (DIR Series) Circular No. 19
November 17th, 2016
To,
All Category – I Authorised Dealer banks
Madam / Sir,
Investment by Foreign Portfolio Investors (FPI) in
corporate debt securities
Attention of Authorised Dealers Category – I (AD Category - I) banks is
invited to paragraph 1 of Schedule 5 to the Foreign Exchange Management
(Transfer or Issue of Security by a Person Resident outside India) Regulations,
2000 notified vide
Notification No. FEMA 20/2000-RB dated May 3, 2000 as amended from
time to time, in terms of which, foreign portfolio investors (FPI) are permitted
to invest only in listed or to-be-listed debt securities. Investment in unlisted
debt securities is permitted only in case of companies in the infrastructure
sector.
2. As announced in the Union Budget 2016-17, it has now been decided to
expand the investment basket of eligible instruments for investment by FPIs
under the corporate bond route to include the following:
(i) Unlisted corporate debt securities in the form of non-convertible
debentures/bonds issued by public or private companies subject to minimum
residual maturity of three years and end use-restriction on investment in real
estate business, capital market and purchase of land. The expression ‘Real
Estate Business’ shall have the same meaning as assigned to it in Foreign
Exchange Management (Transfer or issue of Security by a Person Resident outside
India) Regulations, 2000 Notification No.FEMA.362/2016-RB dated February 15,
2016. The custodian banks of FPIs shall ensure compliance with this condition.
(ii) Securitised debt instruments as under:
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any certificate or instrument issued by a special purpose vehicle (SPV)
set up for securitisation of asset/s where banks, FIs or NBFCs are
originators; and/or
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any certificate or instrument issued and listed in terms of the SEBI
Regulations on Public Offer and Listing of Securitised Debt Instruments,
2008.
3. Investment by FPIs in the unlisted corporate debt securities and
securitised debt instruments shall not exceed Rs. 35,000 crore within the extant
investment limits prescribed for corporate bond from time to time which
currently is Rs. 2,44,323 crore. Further, investment by FPIs in securitised debt
instruments shall not be subject to the minimum 3-year residual maturity
requirement.
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, 2000 (Notification
No. FEMA 20/2000-RB dated May 3, 2000) have been notified by the
Government on October 24, 2016 and are annexed to this circular.
7. 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.
8. The revised norms will be reviewed after one year.
Yours faithfully,
(Manoj Kumar)
Deputy General Manager
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