RBI elucidates eligible Non-Resident investment in debt instruments

RBI issued a Master Direction on January 7, 2025   – Reserve Bank of India (Non-resident Investment in Debt Instruments) Directions, 2025 Consolidating all earlier regulatory circular for debt instruments in India. These Directions shall be applicable with immediate effect. These Directions shall be applicable to all transactions by eligible non-residents in debt instruments.

The following shall be the channels for investment in debt instruments by nonresidents:

General Route for investment in Government securities and corporate debt securities by FPIs subject to specified investment limits and macroprudential limits;

Voluntary Retention Route for investments in Government securities and corporate debt securities, free of certain macro-prudential limits applicable to FPI investments in debt markets under the General Route, by FPIs that commit to remain invested for a stipulated retention period;

Fully Accessible Route for investments by non-residents in certain specified categories of Central Government securities (‘specified securities’) without any restriction; and

Scheme for Trading and Settlement of Sovereign Green Bonds issued by the Central Government, by eligible foreign investors, in the International Financial Services Centre (IFSC).

NRIs may go-through the following circulars issued by RBI to regulate non-resident investment in debt instruments in India.

Foreign Exchange Management (Permissible Capital Accounts Transactions) Regulations, 2000 notified vide Notification No. FEMA 1/2000-RB dated May 03, 2000, as amended from time to time;

Foreign Exchange Management (Borrowing and Lending) Regulations, 2018 notified vide Notification No. FEMA 3(R)/2018-RB dated December 17, 2018, as amended from time to time; and;

Foreign Exchange Management (Debt Instruments) Regulations, 2019 notified vide Notification No. FEMA. 396/2019-RB dated October 17, 2019, as amended from time to time.