The Reserve Bank of India, through its Circular on Investments by Foreign Portfolio Investors in Corporate Debt Securities through the General Route – Relaxations dated 8 May 2025, has introduced significant relaxations for investments by Foreign Portfolio Investors (FPIs) in corporate debt securities through the General Route. With immediate effect, the following regulatory limits have been withdrawn:

1. The short-term investment limit, which capped an FPI’s investment in corporate debt securities with residual maturity of up to one year at 30% cent of the total investment of the FPI in corporate debt securities; and
2. The concentration limit, which restricted an FPI (including its related FPIs) from investing more than the following limits in corporate debt securities:

(a)   15% of the prevailing limit in corporate debt securities for long-term FPIs (i.e. Sovereign Wealth Funds, Multilateral Agencies, Pension / Insurance / Endowment Funds and foreign Central Banks); and

(b)   10% of the prevailing limit for other FPIs.

These relaxations have been made with the stated aim of providing greater ease of investment to FPIs. Previously, FPIs investing under the General Route were required to closely monitor the residual maturity of their investments. As a large investment approached one year residual maturity, FPIs would often look to exit these positions to avoid breaching the 30% short-term investment cap. With the removal of the short-term investment limit, FPIs will have more flexibility to structure their investments.

However, other conditions governing FPI investments through the General Route remain unchanged. Notably:

(a) FPIs may invest only in corporate debt securities with original or residual maturity above one year at the time of investment;

(b) Investment by any FPI (including related FPIs) must not exceed 50% of any issue of a corporate debt security; and

(c) FPI investments in unlisted corporate debt securities (in the form of non-convertible debentures/bonds issued by public or private companies) remain subject to end-use restrictions on investments in real estate business, capital markets and the purchase of land.

Authors – Nidhi Rani – Partner and Swagata Bhattacharya – Head – Knowledge Management

Disclaimer: This update highlights key issues and is not intended to be comprehensive. The contents of this update do not constitute any opinion or determination on, or certification in respect of, the application of Indian law by Talwar Thakore & Associates (“TT&A”). No part of this update should be considered an advertisement or solicitation of TT&A’s professional services.