RBI Eases Norms For Foreign Portfolio Investors Looking To Invest In Unlisted Debt Instruments

Acting on a proposal by the central government in its Union Budget 2016-17, the Reserve Bank of India on Thursday allowed foreign portfolio investors (FPIs) to invest in unlisted debt instruments with some conditions, according to a notification on its website.

The move, aimed at deepening the corporate bond market, will widen the scope of potential investment by FPIs. Earlier, these investors were only allowed to invest in listed, or to-be-listed debt securities and investments in unlisted debt instruments were restricted to the infrastructure sector.

FPIs can now invest in unlisted debt instruments that have a maturity period of more than three years as long as the issuing company does not use the proceeds for real estate activity, to invest in the capital market, or to buy land, the RBI said.

The RBI has also allowed FPIs to invest in securitised debt instruments if these are issued by a special purpose vehicle set up for securitisation where banks, financial institutions, or non banking finance companies are the originators, that is the companies that start the securitisation process.

The total investment by FPIs in unlisted corporate bonds and securitised debt instruments has been set at Rs 35,000 crore, within the overall limit for corporate bonds, which currently stands at Rs 2.44 lakh crore, the RBI said.