RBI's relaxation may boost FPI participation in corporate debt

THE RESERVE BANK of India's (RBI) move to relax investment norms for foreign portfolio investors (FPIs) in the corporate bond market will encourage them to participate more aggressively, according to experts.

- MAHESH NAYAK

Earlier, FPIs had to mandatorily sell bonds with less than a year of residual maturity or increase their overall investment to bring the concentration in one-year residual maturity to below 30%. Due to this stiff regulation, FPI participation used a mere 14.3% (₹1.1 lakh crore) of the overall investment limit of ₹7.63 lakh crore. With this restriction lifted, FPIs can now hold maturing papers until maturity, providing them greater flexibility and reduced regulatory hurdles.

The RBI has also been increasing the investment limit for FPIs in corporate bonds, with the ceiling raised to ₹8.22 lakh crore for April-September and ₹8.80 lakh crore for October 2025-March 2026, indicating its efforts to attract more foreign investment.