Skip to main content

Investments in Debt Instruments by Non-residents

Reserve Bank of India (RBI) has issued directions on investments in debt instruments by non-residents.

What are the channels for investments in debt instruments by non-residents?

  • General Route – for investment in Government securities and corporate debt securities by Foreign Portfolio Investors (FPIs) subject to specified investment limits and macro-prudential limits.
  • Voluntary Retention Route (VRR) – 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 (FAR) – for investments by non-residents in certain specified categories of Central Government securities (‘specified securities’) without any restriction.
  • Scheme for Trading and Settlement of Sovereign Green Bonds (SGrBs) issued by the Central Government by eligible foreign investors in the International Financial Services Centre (IFSC).
  • Special Rupee Vostro Account (SRVA) Route – for investments by persons resident outside India maintaining SRVA, using the rupee surplus balance in the SRVA.

What are the directions for investments under the General Route?

  • Eligible non-residents – FPIs
  • Eligible instruments and investment limits –

Eligible instruments Investment limits
Central Government securities (including Treasury Bills), other than those included as ‘specified securities’ under the FAR 6% of the outstanding stock of Central Government securities other than those included as ‘specified’ securities’ under the FAR
State Government securities 2% of the outstanding stock of State Government securities
Corporate debt securities 15% of the outstanding stock of corporate bonds
  • Minimum residual maturity requirement – 
Central Government securities (including Treasury Bills) and State Government securities No minimum residual maturity requirement
Corporate debt securities Investment only in securities with original / residual maturity of above 1 year
  • Short-term investment limit – 
Central Government securities (including Treasury Bills) and State Government securities with residual maturity up to 1 year Shall not exceed 30% of the total investment of the FPI in each category
  • Security-wise / Issue-wise limit –
Central Government security (including investments through SRVA Route) (updated on August 12, 2025) In aggregate, shall not exceed 30% of the outstanding stock of the security
Corporate debt securities Shall not exceed 50% of any issue of the security
  • Concentration limit –
Central Government securities and State Government securities Shall not exceed 15% of prevailing investment limit for each category in case of long-term FPIs and 10% of prevailing investment limit for other FPIs
  • Investments in municipal bonds shall be reckoned under the investment limit for State Government securities.
  • Investments of rupee surplus balances in SRVA in Central Government Securities (including Treasury Bills) other than those included as ‘specified securities’ under the FAR shall be reckoned under the investment limit for Central Government Securities. (updated on August 12, 2025)
  • Long-Term FPIs shall mean Sovereign Wealth Funds, Multilateral Agencies, Pension / Insurance / Endowment Funds and foreign Central Banks.
  • Reinvestment of coupon by FPIs in Central Government securities and State Government securities shall be reckoned within the limit for investment stipulated for Central Government securities and State Government securities, as applicable. 
  • FPIs may reinvest the proceeds of any sale / redemption of Central Government securities and State Government securities within 2 working days from the date of sale / redemption (including the date of sale / redemption) irrespective of the availability of limits in the category. Any reinvestment beyond 2 working days shall be subject to availability of limits for that category.
  • Clearing Corporation of India Ltd. (CCIL) shall monitor the utilisation of investment limits for Central Government securities and State Government securities. 
  • Utilization of investment limits in corporate debt securities shall be monitored by the depositories registered with Securities and Exchange Board of India (SEBI).

What are the directions for investments under the Voluntary Retention Route (VRR)?

  • Eligible investors – FPIs
  • Eligible instruments –
    • Any instrument listed under Schedule 1 to Foreign Exchange Management (Debt Instruments) Regulations, 2019, other than units of domestic mutual funds or Exchange Traded Funds (ETFs) which invest less than or equal to 50% in equity, as specified at 1A(d) of that schedule, and partly paid debt instruments. However, investments shall be permitted in ETFs that invest only in debt instruments.
    • Repos and reverse repos, subject to the amount borrowed or lent under repo not exceeding 10% of the investments by an FPI under VRR. Repo and reverse repo shall have the same meaning as assigned to it in Section 45U of RBI Act, 1934 excluding repo conducted under the RBI’s Liquidity Adjustment Facility.
  • Investment limit – ₹2,50,000 crore 
  • Allocation of investment amount to FPIs shall be made on tap and allotted on a ‘first come, first served’ basis or through an auction mechanism. FPI may apply for investment limit online to CCIL through their respective custodians.
  • The maximum investment limit which can be allotted to an FPI (including its related FPIs) shall be 50% of the amount offered for each allotment by tap or through auction, in case of demand for more than 100% of amount offered.
  • An FPI shall invest at least 75% of its Committed Portfolio Size (CPS) within 3 months from the date of allotment and remain invested to a minimum extent of 75% of the CPS at all times during the committed retention period. CPS for a FPI shall mean the amount allotted to that FPI under the VRR.
  • The minimum retention period shall be 3 years. Retention Period shall mean the time period that an FPI voluntarily commits for retaining the CPS in India under the VRR.
  • An FPI may, at its discretion, transfer its investments made under the General Route, if any, to the VRR.
  • Income from investments through the VRR may be reinvested at the discretion of the FPI even if such investments are in excess of the CPS.
  • An FPI may, at the end of the retention period, opt to –
    • Liquidate its portfolio and exit; or
    • Shift its investments to the General Route, subject to availability of limit under the General Route; or
    • Continue to hold its investments until maturity or sale, whichever is earlier; or
    • Continue the investments for an additional identical retention period. 
  • An FPI desiring to exit its investments, fully or partly, under the VRR prior to the end of the retention period may do so by selling its investments to another FPI or FPIs. 
  • An FPI shall open one or more separate Special Non-Resident Rupee (SNRR) accounts for investments through the VRR. An FPI may open a separate security account for holding debt securities under the VRR.

What are the directions for investments under the Fully Accessible Route (FAR)?

  • Eligible investors – FPIs, Non-Resident Indians (NRIs) and Overseas Citizens of India (OCI).
  • Eligible instruments (‘specified securities’) –
    • All securities included under the FAR on the date of the directions
    • All new issuances of 5-year, 7-year and 10-year tenors by the Central Government
  • ‘Specified securities’, once so designated, shall remain eligible for investment under the FAR until maturity.

What are the directions for investments under the Special Rupee Vostro Account (SRVA) Route?

(Updated on August 12, 2025)

  • Eligible investors – Person resident outside India maintaining SRVA, using the rupee surplus balance in the SRVA
  • Eligible instruments – Central Government Securities (including Treasury Bills)
  • Investments in ‘specified securities’ included under the FAR shall be in terms of the stipulations prescribed for investments under FAR.
  • Investments in Central Government securities (including Treasury Bills) other than the ‘specified securities’ included under the FAR shall be in terms of the following –
    • The investments shall be subject to the investment limits specified for FPI investments under the General Route.
    • The amount of consideration for purchase of Central Government securities (including Treasury Bills) shall be paid out of the rupee surplus balance held in the SRVA and all sale / maturity proceeds and interest payments shall be credited to the same account.

What are other directions?

  • FPI investment in unlisted corporate debt securities in the form of non-convertible debentures / bonds issued by public or private companies shall be subject to end-use restrictions on investments in real estate business, capital market and purchase of land.
  • An FPI may invest in ‘to be listed’ corporate debt securities. If the corporate debt security is not listed within such period prescribed by SEBI for the purpose, the FPI shall immediately sell the corporate debt security to the issuer or to a third party. 
  • A non-resident may undertake transactions in foreign exchange, interest rate and credit derivatives.
  • An FPI may participate in the Government securities market, both primary and secondary. 
  • AD Cat-I Banks may lend to FPIs for the purpose of placing margins with CCIL for the settlement of Government securities transactions by FPIs.
  • All Over-the-Counter (OTC) trades in Government securities undertaken by FPIs (except transactions undertaken using the NDS-OM web module) shall be reported to the NDS-OM platform on the trade date within 3 hours after the close of trading hours for the Government securities market.
  • OTC secondary market transactions in Government securities undertaken by FPIs may be settled on T+1 or on T+2 basis. However, transactions undertaken through the NDS-OM web module shall be settled only on a T+1 basis.
  • Amounts of investment in Central Government securities (including Treasury Bills), State Government securities and corporate debt securities shall be reckoned in terms of the face value of securities.
  • Any transaction / investment in breach of applicable investment limit shall need to be reversed.
  • Any violation by FPIs shall be subject to regulatory action as determined by SEBI. FPIs are permitted, with the approval of the custodian, to regularize minor violations immediately upon notice, and in any case, within 5 working days of the violation. 


References

Reserve Bank of India. (2025, August 12). 'Investment in Government Securities by Persons Resident Outside India through Special Rupee Vostro account'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12890&Mode=0

Reserve Bank of India. (2025, May 08). 'Investments by Foreign Portfolio Investors in Corporate Debt Securities through the General Route – Relaxations'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12847&Mode=0

Reserve Bank of India. (2025, January 07). 'Master Direction - Reserve Bank of India (Non-resident Investment in Debt Instruments) Directions, 2025'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12765&Mode=0


Follow at - Telegram   Instagram   LinkedIn   X   Facebook

Comments

Popular Posts

Report of the Committee to develop a Framework for Responsible and Ethical Enablement of Artificial Intelligence (FREE-AI) in the Financial Sector

Reserve Bank of India (RBI) has released the report of the committee to develop a framework for responsible and ethical enablement of artificial intelligence (FREE-AI) in the financial sector. Committee to develop a Framework for Responsible and Ethical Enablement of Artificial Intelligence (FREE-AI) in the Financial Sector In the financial sector, Artificial Intelligence (AI) has the potential to unlock new forms of customer engagement, enable alternate approaches to credit assessment, risk monitoring, fraud detection, and offer new supervisory tools. At the same time, increased adoption of AI could lead to new risks like bias and lack of explainability, as well as amplifying existing challenges to data protection, cybersecurity, among others. To encourage the responsible and ethical adoption of AI in the financial sector, the committee to develop a Framework for Responsible and Ethical Enablement of Artificial Intelligence (FREE-AI) in the Financial Sector (Chairperson: Dr. Pushpak B...

Continuous Clearing and Settlement on Realisation in Cheque Truncation System (CTS)

Reserve Bank of India (RBI) has issued direction on continuous clearing and settlement on realisation in Cheque Truncation System (CTS). What is Cheque Truncation System (CTS)? Cheque Truncation System (CTS) involves halting the physical movement of the cheque and its replacement by images of the instrument and the corresponding data contained in the MICR line.  In CTS, 3 images are taken of each cheque – front Gray Scale, front Black & White and back Black & White. MICR (Magnetic Ink Character Recognition) is a 9-digit code printed at the bottom of cheques using magnetic ink – first 3 digits indicate City Code, middle 3 digits indicate Bank Code and the last 3 digits indicate Bank Branch Code. Only CTS-2010 standards compliant instruments can be presented for clearing through CTS. The presenting banks which truncates the cheques need to preserve the physical instruments for 10 years. From when will the continuous clearing and settlement on realisation in CTS be implemented...

What is KYC?

Be it opening a new bank account, applying for a new credit card, registering for new e-wallet, or any other account or facility involving financial matters, the application process is incomplete until KYC is done.  What is KYC? KYC or Know Your Customer is a process of customer identification and verification while opening an account or undertaking a financial transaction. Why is KYC process needed? To prevent money laundering To combat financing of terrorism What is verified under KYC? The banks / financial institutions collect the relevant documents from the customers to verify the following – Proof of identity Proof of address Which documents can be collected for KYC? As per RBI’s Master Direction - Know Your Customer (KYC) Direction, 2016 (Updated as on May 10, 2021), “Officially Valid Document” (OVD) means – Passport Driving licence Proof of possession of Aadhaar number Voter's Identity Card issued by the Election Commission of India Job card issued by NREGA duly signed by an...

Non-Fund Based Credit Facilities

Reserve Bank of India (RBI) has issued directions on non-fund based credit facilities. To whom shall the directions be applicable? The directions shall apply to the following Regulated Entities (REs) for all their Non-Fund Based (NFB) exposures such as guarantee, letter of credit, co-acceptance etc. Commercial Banks (including Regional Rural Banks and Local Area Banks) Primary (Urban) Co-operative Banks (UCBs) / State Co-operative Banks (StCBs) / Central Co-operative Banks (CCBs) All India Financial Institutions (AIFIs) Non-Banking Financial Companies (NBFCs) including Housing Finance Companies (HFCs) in Middle Layer and above, only for the issuance of Partial Credit Enhancement. The directions shall not apply to the derivative exposures of a RE. Which NFB facilities are permitted to be issued by RE? RE shall issue a NFB facility only on behalf of a customer having funded credit facility from the RE. However, this shall not be applicable in respect of – Derivative contracts entered int...

Committees to be constituted by NBFC-BL

Non-Banking Financial Companies (NBFCs) are required to constitute various committees for effective corporate governance. This article lists out some of the important committees to be constituted by the Base Layer NBFCs (NBFC-BL). Board of Directors Applicability Companies Act, 2013 Section 149(1) – Every company shall have a Board of Directors. Composition of the Board Companies Act, 2013 Section 149(1) – The Board of Directors shall consist of individuals as directors – Public company – minimum 3 directors Private company – minimum 2 directors One Person Company – minimum 1 director  Maximum 15 directors (more than 15 directors may be appointed after passing a special resolution) Section 149(4) – Every listed public company shall have at least 1/3rd of the total number of directors as independent directors. Companies (Appointment and Qualifications of Directors) Rules, 2014 Rule 3 – The following companies shall appoint at least 1 woman director – Every listed company Every other...