RBI scraps single-company bond limit for foreign investors


The Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI) released circulars on 15 June 2018 reviewing the requirements for investment by foreign portfolio investors (FPIs) in debt securities. Both the circulars mandated that no FPI was permitted to have an exposure of more than 20% of its corporate bond portfolio in a single company (including exposure to its group companies).

In order to encourage a wider spectrum of investors to access the Indian corporate debt market, the RBI, through its circular dated 15 February 2019, has withdrawn this limit with immediate effect. To give effect to the RBI direction, SEBI, through its circular dated 12 March 2019, also withdrew the requirement stipulated in its circular dated 15 June 2018.

The new circular has also clarified that FPIs are required to comply with the terms, conditions or directions specified by SEBI or RBI in connection with the investment conditions applicable to FPIs in relation to their investment in corporate debt securities, in addition to conditions prescribed under the SEBI (Foreign Portfolio Investors) Regulations, 2014 (FPI regulations).

Moreover, the circular stated that SEBI shall not issue any separate circulars regarding the RBI directions with respect to FPI investments in corporate debt securities and that any non-compliance with the stipulations specified by RBI from time to time in this regard shall be liable for action in accordance with the FPI regulations.

The business law digest is compiled by Nishith Desai Associates (NDA). NDA is a research-based international law firm with offices in Mumbai, New Delhi, Bengaluru, Singapore, Silicon Valley, Munich and New York. It specializes in strategic legal, regulatory and tax advice coupled with industry expertise in an integrated manner.