Date March 3, 2017
SEBI caps FPI investments in unlisted corporate debt securities and securitised debt instruments

Less than two days after the Securities and Exchange Board of India (SEBI) amended the SEBI (Foreign Portfolio Investors) Regulations, 2014 (Regulations) by way of an amendment notification dated 27 February 2017 (Amendment Notification), SEBI issued a fresh circular making further changes to the norms laid down for investments by foreign portfolio investors (FPIs) in unlisted corporate debt securities and securitised debt instruments vide a circular dated 28 February 2017 (Circular).

In addition to the Amendment Notification, the Circular provides for the following:

1. FPIs are permitted to invest in unlisted corporate debt securities in the form of non-convertible debentures/bonds issued by public or private Indian companies subject, inter-alia, to a minimum residual maturity of three years and end-use restriction on investment in real estate business, capital market and purchase of land.

2. Custodians of FPIs are now under an obligation to put in place an appropriate mechanism to ensure compliance with conditions as prescribed by the Reserve Bank of India from time to time.

3. The total investments by FPIs in unlisted corporate debt securities and securitised debt instruments has been capped to INR 350,000,000,000 (Indian Rupees three hundred and fifty billion) within the extant corporate debt limit which is currently INR 2,443,230,000,000 (Indian Rupees two thousand four hundred forty three billion and two hundred and thirty million).

4. The minimum three year residual maturity requirement would not apply to investments by FPIs in securitised debt instruments.

5. All other existing terms and conditions for FPI investments in corporate debt securities shall continue to apply.

The full text of the Circular may be accessed at the following link:

http://www.sebi.gov.in/cms/sebi_data/attachdocs/1488277921324.pdf