Mumbai: At the sixth bi-monthly monetary policy statement 2018-19, the Reserve Bank of India (RBI) announced that it will withdrew the 20 per cent limit on investments by foreign portfolio investors (FPIs) in corporate bonds of an entity. A week after the announcement, the RBI has issued the direction for the same.
This decision was taken 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 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.