RBI relaxes norms for FPI investment

The Reserve Bank of India (RBI), in its sixth bi-monthly monetary policy review, initiated a string of measures for the bond and currency markets.

Among them is allowing foreign portfolio investors (FPI) to take exposures of more than 20 per cent in a corporate entity.

The central bank had limited such an exposure to only 20 per cent of the portfolio.

The curbs were put in

April 2018, leading to protests from the FPIs.

Moreover, the rules also restricted financing for some sectors, such as real estate, that face difficulties in getting loans from banks.

With the restrictions lifted now, real estate and unrated companies can heave a sigh of relief.

Also, FPIs interested in such deals will be putting their money back in India again.

With unrated firms, or firms below investment grade, it is a common practice to enter into bilateral agreements or pacts with only a few FPIs for such deals. The investors had repeatedly requested the RBI to lift such restrictions, FPI officials said.

The RBI said easing the norms would “encourage a wider spectrum of investors to access the Indian corporate debt market.” A circular on this will be issued by mid-February, the RBI added.

Another interesting announcement by the central bank was to set up a task force on ‘offshore rupee markets’. The task force would examine “issues relating to the offshore rupee markets in depth and recommend appropriate policy measures that also factor in the requirement of ensuring the stability of the external value of the rupee”.