RBI takes masala bonds out of corporate bond limit for FPIs

The Reserve Bank of India (RBI) has increased the corporate bond investment limit for foreign portfolio investors (FPIs) by taking out rupee-denominated masala bonds from of the ambit of the total debt investment limit. With effect from October 3, 2017, masala bonds will no longer form a part of the limit for FPI investments in corporate bonds. They will instead form a part of external commercial borrowings (ECBs) and will be monitored accordingly. At present, the limit for investment by FPIs in corporate bonds is Rs 2,443.23 billion. This includes the issuance of masala bonds of Rs 440.01 billion (including those in the pipeline). The amount of Rs 440.01 billion arising from shifting masala bonds into the ECB category will be released for FPI investment in corporate bonds over the next two quarters.