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 investment in eligible instruments by persons resident outside India from the rupee surplus balance maintained in SRVAs.

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 under the General Route. (updated on August 12, 2025)
  • Investments of rupee surplus balances in SRVA in non-convertible debentures / bonds and commercial papers issued by an Indian company shall be reckoned under the investment limit for corporate debt securities under the General Route. (updated on October 03, 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) and non-convertible debentures / bonds and commercial papers issued by an Indian company
  • 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 subject to the investment limits specified for FPI investments under the General Route.
  • Investments in non-convertible debentures / bonds and commercial papers issued by an Indian company shall be subject to the investment limit specified for FPI investments under the General Route. 
  • The amount of consideration for purchase of eligible instruments 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, October 03). 'Investment in Corporate Debt Securities by Persons Resident Outside India through Special Rupee Vostro account'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12909&Mode=0

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

Labels:

Comments

Post a Comment

Popular Posts

Nomination for demat accounts and mutual fund folios

Securities and Exchange Board of India (SEBI) had revised the guidelines on nomination for demat accounts and mutual fund folios.   Which entities are covered by the guidelines? The following regulated entities (REs) are covered by the guidelines – Asset Management Companies (AMCs) of Mutual Funds (MFs) and their Registrars to an issue and share Transfer Agents (RTAs)  Association of Mutual Funds in India (AMFI)  Recognized Depositories  Registered Depository Participants (DPs) What are the guidelines on nomination facility? Nomination shall be mandatory for single holding and optional for jointly held accounts / folios. However, an investor having single holding / account / folio can opt-out of nomination, either online or through physical / offline mode. In case a joint account / folio becomes single holding, post the demise of holders, either nomination or ‘opt-out’, is mandatory. Investors shall have the option to specify guardians when nominees are minors....
Post a Comment
Read more

Framework for recognition of Self-Regulatory Organisation (SRO) for Payment System Operators (PSOs)

Reserve Bank of India (RBI) had released the framework for recognition of Self-Regulatory Organisation (SRO) for Payment System Operators (PSOs). What is the need of Self-Regulatory Organisation (SRO) for Payment System Operators (PSOs)? Industry self-governance helps in industry-wide smooth operations and ecosystem development. RBI’s Payment and Settlement Systems Vision 2019-21 had, therefore, envisaged the setting up of an SRO for PSOs. Accordingly, the framework for recognition of SRO for PSOs was released in October 2020. What shall be the role of SRO for PSOs? An SRO is a non-governmental organisation that sets and enforces rules and standards relating to the conduct of member entities in the industry, with the aim of protecting the customer and promoting ethical and professional standards.  The SRO is expected to resolve disputes among its members internally through mutually accepted processes to ensure that members operate in a disciplined environment and even accept penal ...
Post a Comment
Read more

Nomination Facility in Banks

Reserve Bank of India (RBI) has issued directions on nomination facility in deposit accounts, safe deposit lockers and articles kept in safe custody with the banks. What is the legal framework for nomination facility in banks? Banking Regulation Act, 1949 (BR Act) contain provisions on nomination facility in banks. Section 45ZA – Nomination for payment of depositors' money  Where a deposit is held by a banking company to the credit of one or more persons, the depositor / all the depositors together, may nominate one person to whom in the event of his / their death, the amount of deposit may be returned by the banking company. Where the nominee is a minor, the depositor shall appoint any person to receive the amount of deposit in the event of his death during the minority of the nominee. Section 45ZC – Nomination for return of articles kept in safe custody with banking company  Where any person leaves any article in safe custody with a banking company, such person may nominate ...
Post a Comment
Read more

Reserve Bank of India Act, 1934 – Part-I – Preamble and Section 1 to 13

The Reserve Bank of India Act, 1934 provides the statutory basis of the functioning of the Reserve Bank of India (RBI). In a series of articles, we will briefly go through the provisions of RBI Act, 1934. This is the first article in the series. Preamble of the Act RBI to – Regulate the issue of bank notes. Keep reserves for monetary stability in India. Operate currency and credit system of the country to its advantage. The primary objective of the monetary policy is to maintain price stability while keeping in mind the objective of growth. Chapter I – Preliminary Section 1 – Short title, extent and commencement 1(1) – This Act may be called the Reserve Bank of India Act, 1934. 1(2) – The Act extends to whole of India. Chapter II - Incorporation, Capital, Management and Business Section 3 – Establishment and incorporation of Reserve Bank 3(1) – RBI to take over management of the currency from the Central Government. 3(2) – RBI to have perpetual succession, common seal, and shall by...
Post a Comment
Read more

Reserve Bank of India Act, 1934 – Part-III – Section 20 to 40

The Reserve Bank of India Act, 1934 provides the statutory basis of the functioning of the Reserve Bank of India (RBI). In a series of articles, we will briefly go through the provisions of RBI Act, 1934. This is the third article in the series.  Chapter III - Central Banking Functions Section 20 – Obligation of the Bank to transact Government business RBI shall undertake – To accept monies for account of the Central Government and to make payments up to the amount standing to the credit of its account, and to carry out its exchange, remittance and other banking operations. Management of the public debt of the Union. Section 21 – Bank to have the right to transact Government business in India The Central Government shall entrust RBI with – All its money, remittance, exchange and banking transactions in India, and shall deposit free of interest all its cash balances with RBI. The Central Government may carry on money transactions at places where RBI has no branches or agencies and m...
Post a Comment
Read more