On 8-5-2025, the Reserve Bank of India issued a notification regarding relaxations in corporate debt securities through General Route withdrawing the requirements for investment by Foreign Portfolio Investors in Corporate Debt Securities.
“This landmark agreement marks a significant step in reducing trade barriers between the world’s fifth and sixth largest economies. It stands as a testament to the dedicated efforts of both the Government of India and the Government of the UK, achieved after nearly four years of negotiations.” – Manisha Shroff, Partner at Khaitan & Co.
Key points:
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Reserve Bank of India (‘RBI’) issued the Master Directions- RBI (Non- resident Investment in Debt Instruments) Directions, 2025 on 7-1-2025 applicable to all transactions by eligible non- residents in debt instruments.
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The relaxation has withdrawn the requirement for investments by Foreign Portfolio Investors (‘FPIs’) in Corporate Debt Securities to comply with the short-term investment limit and the concentration limit.
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Earlier, the provision relating to “Short- term investment limit” laid down that:
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for Investment by an FPI in corporate debt securities with residual maturity up to 1 year will not exceed 30% of the total investment of the FPI in corporate debt securities;
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Short-term investment limit will apply on investments on an end-of-day basis;
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The limit would not apply:
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If the short-term investments of an FPI consist entirely of investments made on or before April 27, 2018;
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To investments by FPIs made between July 08, 2022, and October 31, 2022 (both dates included).
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Earlier, the provision relating to Concentration limit lad down that investment in corporate debt securities by an FPI will not exceed 15% of the prevailing limit for these securities in case of long-term FPIs and 10% of prevailing investment limit for other FPIs.
“The substantial duty reductions across various tariff lines are expected to enhance market access and foster long-term economic benefits for both nations. Moving forward, the emphasis should be on implementing best practices and adopting a phased approach to further strengthen and deepen trade relations” – Manisha Shroff, Partner at Khaitan & Co.
