INDIA: SEBI Publish Circular on Foreign Portfolio Investment in Corporate Debt Securities

Thursday October 5 2017

Securities and Exchange Board of India (SEBI) have published a circular on foreign portfolio investment in corporate debt securities.

Accordingly, in partial modification to Para 2 & 3 of the SEBI circular dated August 04, 2016, with effect from October 03, 2017, foreign investments in RDB shall no longer be reckoned against the combined corporate debt limit (CCDL). Further, the CCDL shall be renamed as the Corporate Debt Investment Limits (CDIL) for FPIs. The upper limit for CDIL shall, henceforth, be stated only in Rupee terms.

A sub-limit exclusively for investments by Long Term FPIs (Sovereign Wealth Funds (SWFs), Multilateral Agencies, Endowment Funds, Insurance Funds, Pension Funds and Foreign Central Banks) in the infrastructure sector shall be created within the overall CDIL. The term ‘Infrastructure’ shall be as defined under the Master Direction on External Commercial Borrowings issued by the Reserve Bank of India. However, Long term FPIs will continue to be eligible to invest in sectors other than infrastructure, as hitherto.

This sub-limit for Long Term FPIs shall be INR 9,500 cr with effect from October 03, 2017 and shall be enhanced to INR 19,000 cr on January 01, 2018. This sublimit shall be available for investment on tap.

The sub-limit for Long Term FPIs shall include their investment in both listed and unlisted corporate debt issued by companies in the infrastructure sector. As prescribed in the SEBI circular SEBI/HO/IMD/FPIC/CIR/P/2017/16 dated February 28, 2017, investments by FPIs in the unlisted corporate debt securities and securitised debt instruments shall not exceed INR 35,000 cr within the extant CDIL.

All other extant conditions with respect to FPI investments in corporate debt securities shall continue to apply.

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