Bond Investment Guidelines A Relief For Foreign Investors

Circulars on corporate bond investments by foreign portfolio investor (FPIs), issued by the Reserve Bank of India (RBI) on 27 April and 1 May, disconcerted the financial services sector, particularly the provisions restricting investment by a single FPI in a particular bond issue to 50% of the amount of the issue, and limiting the exposure of an FPI to a single body corporate to 20% of the overall corporate bond portfolio of the FPI. FPIs were also perturbed by the lack of clarity and conflicting interpretations of certain provisions.

Despite the RBI's laudable attempt to deepen the bond market and increase investor participation by relaxing the residual maturity requirements applicable to corporate bond investments by FPIs, bond investments by FPIs seemed to come to a standstill, and various market participants such as investors and intermediaries made representations on the restrictions to the RBI and to the Securities and Exchange Board of India (SEBI), which