RBI Notifies Major Relaxations for FPIs in Corporate Debt Securities [Read Order]

The Reserve Bank of India (RBI), through its circular dated May 8, 2025 (RBI/2025-26/35), has announced significant relaxations for Foreign Portfolio Investors (FPIs) investing in corporate debt securities through the General Route. This strategic move aims to facilitate greater capital inflow and enhance the attractiveness of India’s debt markets to global investors.

Key Relaxations

In a review of the current framework under the Master Direction – Non-resident Investment in Debt Instruments, 2025, RBI has withdrawn the following two key restrictions for FPI investments in corporate debt:

1. Short-Term Investment Limit: Previously, FPIs were required to limit a portion of their investments in corporate debt instruments with residual maturity less than one year. This restriction has now been removed.
2. Concentration Limit: FPIs were subject to a ceiling on how much they could invest in a single corporate issuer. This concentration cap has now been eliminated.

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These relaxations take effect immediately, providing FPIs with greater flexibility and operational ease in managing their debt portfolios in India.

The RBI’s decision is aligned with its broader objective to:

• Deepen the corporate bond market
  Facilitate non-resident investments
• Promote ease of doing business in financial markets

By removing maturity-based and issuer-level investment limits, the RBI aims to remove friction points and foster a more liberal and open investment climate for foreign investors.

The changes have been made under the powers conferred by sections 10(4) and 11(1) of the Foreign Exchange Management Act (FEMA), 1999. The circular supersedes specific provisions under the existing Master Direction on Non-resident Investment in Debt Instruments.

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An updated version of the Master Direction has also been issued to reflect these changes.

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