RBI removes minimum maturity cap for FPI investment in bond market

The Reserve Bank of India (RBI), in an attempt to keep foreign investors invested in the local bond market, late on Friday said they could invest in any maturity they wished for instead of the restrictive clause earlier that the investment must be in paper that had at least three years left to mature.

“The minimum residual maturity requirement for central government securities and state development loan categories stands withdrawn, subject to the condition that investment in securities with residual maturity below one year by an FPI under either category shall not exceed, at any point of time, 20 per cent of the total investment of that FPI in that category,” the RBI said in a notification on its website. 

More Freedom

  • RBI withdraws minimum maturity cap of bonds for FPIs
  • Earlier, FPIs were allowed to invest in bonds maturing in at least three years 
  • Investment below one year should not be more than 20% of the book
  • Minimum residual maturity cap for corporate bonds now at one year, down from earlier cap of three years 
  • Cap on aggregate FPI investments in any G-sec would now be 30%, up from 20% 
  • FPI limit auction scrapped