Encouraging foreign investments! RBI lifts cap on FPI investments in corporate bonds

The Reserve Bank of India (RBI) Friday withdrew the 20 per cent limit on investments by FPIs in corporate bonds of an entity with a view to encourage more foreign investments.

As part of the review of the FPI investment in corporate debt undertaken in April 2018, it was stipulated that no FPI should have an exposure of more than 20 per cent of its corporate bond portfolio to a single corporate (including exposure to entities related to the corporate).

While the provision was aimed at incentivising FPIs to maintain a portfolio of assets, market feedback indicates that foreign portfolio investors (FPIs) have been constrained by this stipulation, the RBI said.

"...In order to encourage a wider spectrum of investors to access the Indian corporate debt market, it has been decided to withdraw this provision with immediate effect," the central bank said.

The RBI said the directions in this regard have been issued the Foreign Exchange Management Act.