TMI BlogInvestment by Foreign Portfolio Investors (FPI) in Debt - Review (Updated up to February 26, 2021)X X X X Extracts X X X X X X X X Extracts X X X X ..... DIR Series) Circular No. 22 dated April 6, 2018 , A.P. (DIR Series) Circular No. 24 dated April 27, 2018 , and A.P. (DIR Series) Circular No. 26 dated May 1, 2018 , on the captioned subject. 3. Based on the feedback received from custodians, FPIs and other stakeholders, it has been decided to provide some operational flexibility as well as transition path for FPIs and custodians to adapt to these regulations. 4. Accordingly, in supercession of the directions contained in AP (DIR Series) Circular No. 24 dated April 27, 2018 and AP (DIR Series) Circular No. 26 dated May 1, 2018 , the following directions are issued: (a) Definitions i. Short-term investments are defined as investments with residual maturity up to one year; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties (G-secs), including in Treasury Bills, and State Development Loans (SDLs) without any minimum residual maturity requirement, subject to the condition that short-term investments by an FPI under either category shall not exceed 30% 4 of the total investment of that FPI in that category. (ii) In terms of A.P. (DIR Series) Circular No. 71 dated February 03, 2015 , FPIs were required to invest in corporate bonds with a minimum residual maturity of three years. Henceforth, FPIs are permitted to invest in corporate bonds with minimum residual maturity of above one year, subject to the condition that short-term investments in corporate bonds by an FPI shall not exceed 30% 5 of the total investment of that FPI in corporate bonds. These s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ). Any transactions in breach of the investment limit in each category will not be accepted. Custodians and FPIs may note that any transaction that leads to a breach of the investment limit for the category will need to be reversed. iii. Upon sale/redemption of securities (in G-secs and SDLs), the concerned FPIs may reinvest within a period of two working days from the date of sale/redemption (including date of sale/redemption). If the reinvestment is not made within that time period, reinvestment shall be subject to availability of limits for that category. iv. The primary responsibility of complying with all limits for investment in G-secs and SDLs viz., investment utilization limit, security wise limit in G-secs, concentration limi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5% in case of FPIs in the Long-term sub-category) of the investment limit for the category on the effective date, that FPI shall be allowed to undertake additional investments such that its portfolio size at the end of any day (INVt) does not exceed INV0 plus 2.5% of the investment limit for the category on the effective date. Once INVt falls below the prevailing concentration limit for the category, the FPI shall be free to make investments up to the applicable concentration limit. c. All other FPIs will be allowed to invest up to the applicable concentration limit. (f) Single/Group investor-wise limits in corporate bonds FPI investment in corporate bonds shall be subject to the following requirements: (i) Investment by any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PI shall invest in partly paid debt instruments. 5. These directions would be applicable with immediate effect. The directions contained in A.P. (DIR Series) Circular No. 24 dated April 27, 2018 and A.P. (DIR Series) Circular No. 26 dated May 1, 2018 stand withdrawn. 6. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/ approvals, if any, required under any other law. Yours faithfully (Dimple Bhandia) Chief General Manager --- 1 The words Schedule 1 to the Foreign Exchange Management (Debt Instruments) Regulations, 2019 notified vide Notification No. FEMA. 396/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orporate (including exposure to entities related to the corporate), it shall not make further investments in that corporate until this requirement is met. b. New investments (i.e., investments made after April 27, 2018 in corporates other than those referred to in para 4(f)(ii)a. above) by FPIs would be exempted from this requirement till March 31, 2019. These new investments will, however, have to comply with this requirement thereafter. c. To facilitate newly registered FPIs to build up a diversified portfolio, FPIs registering after April 27, 2018 are permitted to comply with this requirement by March 31, 2019, or six months from the date of registration, whichever is later. 11 The words and 4(f)(ii) deleted, vide A.P. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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