RBI eases norms for foreign investor participation in debt market

UNI
Saturday, 28 April 2018

The Reserve Bank of India (RBI) has eased investment norms for overseas investors to raise exposure of foreign portfolio investors in government securities, a move that will help in softening yields.

Mumbai: The Reserve Bank of India (RBI) has eased investment norms for overseas investors to raise exposure of foreign portfolio investors in government securities, a move that will help in softening yields.

RBI has withdrawn an investment cap that bars foreign portfolio investors (FPIs) from investing in Indian bonds with less than three-year maturity, a move that is expected to increase more overseas investor participation in domestic bond market.

''The minimum residual maturity requirement for Central Government securities and State Development Loans (SDLs) categories stands withdrawn, subject to the condition that investment in securities with residual maturity below 1 year by an FPI,'' an RBI notification said.

Moreover, they can even invest one-fifth of their total investment in less than one-year residual maturity papers.

FPIs can now own sovereign securities 30 per cent of the outstanding or available stock compared with 20 per cent, earmarked earlier, notification added ''FPIs were required to invest in corporate bonds with a minimum residual maturity of three years.

Henceforth, FPIs are permitted to invest in corporate bonds with minimum residual maturity of above one year,'' the notification said.

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