RBI has issued Master Directions on Reserve Bank of India (Non-resident Investment in Debt Instruments) Directions, 2025 (‘Directions’), which came into effect on January 7, 2025, and consolidated the regulations relating to non-resident investment in debt instruments in India. In addition, the Directions also provide clarity on certain aspects relating to investment by non-resident in debt instruments. These include the following:

i.    Under the general route for investment by FPIs in corporate debt:

a. FPIs are permitted to invest only in corporate debt securities that have an original or residual maturity of more than one year. The Directions clarify that FPIs cannot invest in: (i) corporate debt securities that have an optionality clause allowing redemption in less than one year; or (ii) amortized debt instruments where the duration of the instruments is up to one year.

b. The Directions clarify that the minimum maturity requirement, which was applicable previously to all corporate debt securities (barring a few exceptions), does not apply to FPIs investing in the following types of securities (in addition to the extant exceptions):

• any certificate or instrument issued by a special purpose vehicle established for the securitization of assets, where the originators are banks, financial institutions or non-banking financial companies (‘NBFCs’); and/or
• any certificate or instrument issued and listed in accordance with the SEBI (Issue and Listing of Securitized Debt Instruments and Security Receipts) Regulations, 2008.

ii.   The Directions clarify that if FPIs invest in corporate debt securities which are ‘to be listed’, and such debt securities are not listed within the timelines prescribed by SEBI, then such securities must immediately be redeemed by the issuer or sold by the FPI to a third party.