Foreign Portfolio Investors: New Bond Rules A Surprise

The foreign portfolio investor (FPI) framework introduced in 2014 was welcomed as a prime example of regulatory streamlining. However, the framework has presented challenges, particularly for investments in Indian corporate debt. Until recently, corporate debt investments by FPIs were regulated by a series of circulars issued by the Reserve Bank of India (RBI) in 2015. The 2015 circulars were recast by circulars issued by the RBI on 27 April and 1 May.

Although the RBI had signalled in October 2017 that it would undertake a "detailed review" of the regulatory framework on debt investment by FPIs, and had dropped a similar hint in a 6 April circular, the 2018 circulars have caught FPIs and other stakeholders unawares.