Foreign Portfolio Investors are governed by the Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations 2014 and by the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2017, as amended from time to time. Thereafter, Securities and Exchange Board of India (“SEBI”) vide Circular No. CIR/IMD/FIIC/1/2015 dated February 3, 2015 and Circular No. CIR/IMD/FPIC/8/2015 dated Oct 6, 2015 had stipulated minimum residual maturity restriction of three years for investment by FPI in Government Securities (G -secs), State Development Loans (SDLs)and Corporate Debts.
On June 15, 2018, SEBI vide Circular No. IMD/FPIC/CIR/P/2018/101 and the Reserve Bank of India (“RBI”) vide A.P. (DIR Series) Circular No. 31 dated June 15, 2018, inter alia, maintained that no FPI shall have an exposure of more than 20% of its corporate bond portfolio to a single corporate (including exposure to related parties of corporate as defined under section 2(76)(viii) of Companies Act, 2013).
Today, SEBI vide Circular No. IMD/FPIC/CIR/P/2019/37 dated March 12, 2019, SEBI removed the 20% cap. In it’s Circular, SEBI has maintained that this was to encourage a wider spectrum of investors to access the Indian corporate debt market. In light of this, RBI vide A.P. (Dir Series) Circular No. 19 dated February 15, 2019, withdrew the above provision of restricting exposure of FPI’s corporate bond portfolio to a single rate.
All other norms are required to be complied with including investment caps and restrictions.