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RBI/2016-17/138
A.P. (DIR Series) Circular No.19
November
17, 2016
To,
All Category – I Authorised
Dealer banks
Madam / Sir,
Investment by Foreign Portfolio
Investors (FPI) in corporate debt securities
Attention of Authorised Dealers
Category – I (AD Category - I) banks is invited to paragraph 1 of Schedule
5 to the Foreign Exchange Management (Transfer or Issue of Security by a
Person Resident outside India) Regulations, 2000 notified vide Notification No.FEMA 20/2000-RB dated May 3, 2000 as
amended from time to time, in terms of which, foreign portfolio investors
(FPI) are permitted to invest only in listed or to-be-listed debt
securities. Investment in unlisted debt securities is permitted only in
case of companies in the infrastructure sector.
2. As announced in the Union
Budget 2016-17, it has now been decided to expand the investment basket of
eligible instruments for investment by FPIs under the corporate bond route
to include the following:
(i) Unlisted corporate debt
securities in the form of non-convertible debentures/bonds issued by public
or private companies subject to minimum residual maturity of three years
and end use-restriction on investment in real estate business, capital
market and purchase of land. The expression ‘Real Estate Business’ shall
have the same meaning as assigned to it in Foreign Exchange Management
(Transfer or issue of Security by a Person Resident outside India)
Regulations, 2000 Notification
No.FEMA.362/2016-RB dated February 15, 2016. The custodian banks of
FPIs shall ensure compliance with this condition.
(ii) Securitised debt
instruments as under:
a.
any
certificate or instrument issued by a special purpose vehicle (SPV) set up
for securitisation of asset/s where banks, FIs or NBFCs are originators;
and/or
b.
any
certificate or instrument issued and listed in terms of the SEBI
Regulations on Public Offer and Listing of Securitised Debt Instruments,
2008.
3. Investment by FPIs in the
unlisted corporate debt securities and securitised debt instruments shall
not exceed ? 35,000 crore within the extant investment limits prescribed
for corporate bond from time to time which currently is ? 2,44,323 crore.
Further, investment by FPIs in securitised debt instruments shall not be
subject to the minimum 3-year residual maturity requirement.
4. All other existing conditions
for investment by FPIs in the debt market remain unchanged.
5. AD Category - I banks may
bring the contents of the circular to the notice of their
customers/constituents concerned.
6. Necessary amendments to
Foreign Exchange Management (Transfer or Issue of Security by a Person
Resident outside India) Regulations, 2000 (Notification
No. FEMA 20/2000-RB dated May 3, 2000) have been notified by the Government on October 24, 2016 and are
annexed to this circular.
7. The directions contained in
this circular have been issued under Sections 10(4) and 11(1) of the
Foreign Exchange Management Act, 1999 (42 of 1999) and are without
prejudice to permissions / approvals, if any, required under any other law.
8. The revised norms will be
reviewed after one year.
Yours
faithfully,
(Manoj
Kumar)
Deputy General Manager
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