Proposed FPI Rule Changes: A Welcome Development

The regulatory environment for investment in corporate debt by foreign portfolio investors (FPIs) has been turbulent with sweeping changes introduced by the Reserve Bank of India (RBI) in April 2018, followed by other changes introduced on 15 June by both the RBI and the Securities and Exchange Board of India (SEBI). Unlike global financial regulatory rule-making practices, these changes were introduced without the issuance of consultation papers seeking feedback of market participants. These developments, and their manner of introduction, created anxiety among issuers, FPIs and other market participants.

In view of recent developments in domestic and international financial markets, various measures were considered to improve the flow of foreign investments into India, particularly in corporate debt. These included easing of rules applicable to FPIs, including relaxing the applicability of the group exposure thresholds (20%) and the per issue investment limit (50% of