RBI removes FPI concentration limits in debt market, eases investment rules

The Reserve Bank of India has relaxed investment norms for foreign portfolio investors (FPIs), removing concentration limits under the General Route in a move aimed at improving foreign participation in India's debt market.

The measure gives FPIs greater flexibility in allocating investments across eligible debt instruments and reduces operational restrictions that have traditionally influenced foreign investor participation in the bond market.

The announcement is part of a broader package unveiled by the RBI to attract foreign capital and strengthen India's external position amid heightened global uncertainty, currency volatility and geopolitical tensions.

Market participants say the move could make Indian fixed-income assets more accessible to global investors by simplifying investment rules.

Foreign participation in debt markets is often influenced not only by yields but also by regulatory and operational requirements, making such easing measures significant for attracting long-term capital.

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Commenting on the policy, Ritesh Taksali, Chief Investment Officer at Edelweiss Life Insurance, said the RBI's various measures to strengthen the balance of payments, including expanding the universe of government securities available to foreign investors and introducing schemes to attract foreign currency deposits, should help limit further weakness in the rupee.

He added that the removal of concentration limits gives FPIs greater flexibility while investing in Indian debt and eliminates an additional layer of restrictions, potentially making Indian bond markets more attractive to overseas investors.

Echoing the positive sentiment, Vikas Garg, Head of Fixed Income at Invesco Mutual Fund, noted that the government's decision to relax taxation rules for FPIs investing in government securities could further improve the appeal of Indian debt markets and enhance the prospects of greater foreign participation, including through global bond indices.

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