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

Rupee Interest Rate Derivatives

Reserve Bank of India (RBI) has issued directions on rupee interest rate derivatives. What is Interest Rate Derivative (IRD)? Interest Rate Derivative (IRD) means a financial derivative contract whose value is derived from one or more Rupee interest rates, prices of Rupee interest rate instruments, or Rupee interest rate indices. To which transactions shall the directions be applicable? The directions shall be applicable to Rupee IRD transactions undertaken in the over-the-counter (OTC) market and on recognised stock exchanges in India. Forward Contracts in Government Securities shall be undertaken in the OTC market in terms of the Reserve Bank of India (Forward Contracts in Government Securities) Directions, 2025, dated February 21, 2025. Who are eligible participants in IRD markets? Resident Non-resident, through its central treasury or its group entity, where applicable.  What are the directions on trading of IRDs on recognised stock exchanges? A recognised stock exchange is per...
Post a Comment
Read more

Export / Import of Currency and Possession / Retention of Foreign Currency

Reserve Bank of India (RBI) has updated the guidelines on export and import of currency. What are the guidelines on export and import of Indian currency? Transferor Transfer from Transfer to Nature of currency Maximum limit Person resident in India India Countries other than Nepal and Bhutan Currency notes of Government of India (GoI) and RBI notes ₹25000 per person Commemorative coins 2 coins Person resident in India gone out of India on temporary visit, on his return Countries other than Nepal and Bhutan India Currency notes of GoI and RBI notes ₹25000 per person Person resident outside India (not citizen of Pakistan / Bangladesh) visiting India India Any country Currency notes of GoI and RBI notes ₹25000 per person Any country India Person (not citizen of Pakist...
Post a Comment
Read more

National Strategy for Financial Inclusion (NSFI) 2025-30

Reserve Bank of India (RBI) has published National Strategy for Financial Inclusion (NSFI) 2025-30. Financial Inclusion The Committee on Financial Inclusion (Chairman: Dr C Rangarajan, RBI, 2008) defined financial inclusion as “the process of ensuring access to financial services, timely and adequate credit for vulnerable groups such as weaker sections and low-income groups at an affordable cost”. The Committee on Medium-Term Path to Financial Inclusion (Chairman: Shri Deepak Mohanty, RBI, 2015) viewed financial inclusion as, “convenient access to a basket of basic formal financial products and services that should include savings, remittance, credit, government-supported insurance and pension products to small and marginal farmers and low income households at reasonable cost with adequate protection progressively supplemented by social cash transfers, besides increasing the access of small and marginal enterprises to formal finance with a greater reliance on technology to cut costs an...
Post a Comment
Read more

RBI’s Monetary Policy (December 05, 2025): In A Nutshell

The bi-monthly monetary policy of Reserve Bank of India (RBI) was announced on December 05, 2025. Here are some of the highlights of the monetary policy announcement. Rates   Change Rate Policy repo rate Reduced by 25 bps 5.25% Standing deposit facility (SDF) rate 5.00% Marginal standing facility (MSF) rate 5.50% Bank rate 5.50% Monetary policy stance Monetary policy stance unchanged as ‘neutral’. Domestic Economy  Real Gross Domestic Product (GDP) growth accelerated to 8.2% in Q2, buoyed by strong spending during the festive season which was further facilitated by the rationalisation of the goods and services tax (GST) rates.  Real GDP growth for 2025-26 is projected at 7.3%. For the first time since the adoption of flexible inflation targeting (FIT), average headline inflation for a quarter at 1.7% in Q2, breached the lower tolerance threshold (2%) of the inflation target (4%). It dipped further to an all-time low of 0.3% in October 2025. The underlying inflation pressu...
Post a Comment
Read more

What are ‘Significant Benchmarks’?

Reserve Bank of India (RBI) has notified Modified Mumbai Interbank Forward Outright Rate (MMIFOR) administered by FBIL as a ‘significant benchmark’. What are Financial Benchmarks? Financial Benchmarks mean prices, rates, indices, values or a combination thereof related to financial instruments that are calculated periodically and used as a reference for pricing or valuation of financial instruments or any other financial contract. What is ‘Significant Benchmark’? ‘Significant benchmark’ means any benchmark notified by Reserve Bank of India (RBI) as a ‘significant benchmark’ under Financial Benchmark Administrators (Reserve Bank) Directions, 2019. RBI notifies a benchmark as a ‘significant benchmark’ taking into consideration its use, efficiency and relevance in domestic financial markets. Who is Financial Benchmark Administrator? Financial Benchmark Administrator (FBA) means a person who controls the creation, operation and administration of ‘significant benchmarks’ in the markets for ...
Post a Comment
Read more