Wednesday May 18 2016

News Source: Global Disclosures

Focus: Foreign Investment

Type: General

Country: India




The Reserve Bank of India, in consultation with the Ministry of Finance has proposed permitting foreign Portfolio Investor’s (FPI’s) to invest in unlisted debit securities and securitised debt instruments.

In order to aid in the development of the corporate bond market, the investments permitted by FPI’s will be expanded to include unlisted securities and pass through securities issued by securitisation special purpose vehicles (SPV’s).

Schedule 5, paragraph 5, of the Foreign Exchange Management Regulations, 2000, provides for the terms by which FPI’s are permitted to invest in listed or to-be-listed debt securities. Investment in unlisted debt securities is permitted only in case of companies in the infrastructure sector (Please see our previous article of 26 April 2016: 

http://www.funds-axis.com/news-articles/india-rbi-permits-foreign-investment-in-reits-invits-and-aifs/

Investment by FPI’s in securitised debt instruments is currently not permitted.

Under the announcement in the Union Budget 2016-17, instruments eligible for FPI investment through corporate bonds, will include;

  • Unlisted Debt Instruments: FPI’s can invest in the primary issues of non-convertible debentures / bonds by a public company issued in dematerialised form, provided the issuing company does not use the borrowing proceeds for real estate activities, purchase of land, investment in capital markets or on lending to other entities. Custodian banks of FPI’s shall be responsible for compliance with this condition based on an undertaking from the issuing company;
  • Securitised Debt Instruments: FPI’s are permitted to invest in the following securitised debt instruments:
    (i) Any certificate or instrument issued by an SPV set up for securitisation of assets where banks, FI’s or NBFC’s are originators, as defined in terms of the RBI Circular 21.04.048/2005-06 dated 01 February, 2006.
    (ii) Any certificate or instrument issued and listed in terms of the SEBI “Regulations on Public Offer and Listing of Securitised Debt Instruments, 2008”

Responses are to be emailed to fmrd@rbi.org.in by 25 May 2016.
Please click on the link above for further details.