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RBI/2017-18/64
A.P. (DIR Series) Circular No. 05
September 22nd, 2017
To
All Category - I Authorised Dealer Banks
Madam / Sir,
Investment by Foreign Portfolio Investors in Corporate Debt Securities –
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, 2000 notified vide Notification
No. FEMA.20/2000-RB dated May 3rd, 2000, as amended from time to time.
2.
Currently, the limit for investment by Foreign Portfolio Investors (FPIs) in
corporate bonds is 244,323 crore. This includes issuance of Rupee denominated
bonds overseas (Masala Bonds) by resident entities of ₹ 44,001 crore (including
pipeline). The Masala Bonds are presently reckoned both under Combined Corporate
Debt Limit (CCDL) for FPI and External Commercial Borrowings (ECBs). On a
review, and to further harmonise norms for Masala Bonds issuance with the ECB
guidelines, the following changes are made:
With effect from October 3,
2017, Masala bonds will no longer form a part of the limit for FPI investments
in corporate bonds. They will form a part of the ECBs and will be monitored
accordingly. Eligible Indian entities proposing to issue Masala Bonds may
approach Foreign Exchange Department, Reserve Bank of India, Central Office,
Mumbai as required in terms of
A. P. (DIR Series) Circular No.47 dated June 7th,
2017.
The amount of ₹ 44,001 crore arising from shifting of Masala bonds
will be released for FPI investment in corporate bonds over the next two
quarters as specified in Table 1.
| Table 1 – Limit for FPI Investments in Corporate Bonds
|
|
Amount
( crore) |
| 1. Current FPI limits for corporate bonds (including masala bonds)
|
2,44,323 |
| (a) of which Masala bonds (including pipeline) |
44,001 |
| 2. FPI limit after shifting Masala bonds to ECB (1-(a)) |
2,00,322 |
| 3. Additional limit for Q3 FY18 |
27,000 |
| 4. FPI limit for corporate bonds from 03 Oct 2017 (2+3) |
2,27,322 |
| of which reserved for investment by long term FPIs in
infrastructure |
9,500 |
| 5. Additional limit for Q4 FY18 |
17,001 |
| 6. FPI limit for corporate bonds from January 01, 2018 (4+5) |
2,44,323 |
| of which reserved for investment by long term FPIs in
infrastructure |
9,500 |
3. An amount of ₹ 9,500 crore in each quarter will be available only for
investment in infrastructure sector by long term FPIs (i.e., Sovereign Wealth
Funds, Multilateral Agencies, Endowment Funds, Insurance Funds, Pension Funds
and Foreign Central Banks). The definition of ‘Infrastructure’ shall be the same
as defined under the Master Direction on ECBs issued by the Reserve Bank of
India. Long term FPIs will continue to be eligible to invest in sectors other
than infrastructure.
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. 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
(Shekhar Bhatnagar)
Chief General Manager-in- Charge
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