RBI Relaxes Norms for Investment by FPIs in Defaulted Bonds

As per the RBI Circular on Investment by Foreign Portfolio Investors in Debt – Review (‘FPI Directions’), investments by Foreign Portfolio Investors (‘FPIs’) in corporate bonds, under the general investment route, are subject to various restrictions, including minimal residual maturity of one year and 50% limit on investments by an FPI and any related FPIs.

However, investments by FPIs in debt instruments issued by entities under corporate insolvency resolution process as per the resolution plan approved by the National Company Law Tribunal under the IBC are exempt from the aforesaid restrictions. By way of Circular dated February 26, 2021, the RBI has now extended this exemption to FPI investments in defaulted bonds, i.e., non-convertible debentures or bonds which are under default, either fully or partly, in terms of repayment of principal on maturity or principal instalment in the case of amortising bond.

Published In:Inter Alia - Quarterly Edition - March 2021 [ English Chinese japanese ]
Date: March 31, 2021