RBI Raises Investment Limit to attract more Foreign Funds

New Delhi, January 24, 2020:

The Reserve Bank of India (RBI) has increased the investment limit for Foreign Portfolio Investors (FPI) in government and corporate sectors from 20 percent to 30 percent.

RBI has raised the limit with an aim to attract more foreign funds in India. Short-term investments currently have a limit of 20 percent of the total investment of the FPI in either central government security or state development loans or corporate bonds.

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In a circular issued by RBI, it informed about the increase in the investment scale. The apex bank also relaxed the voluntary retention route (VRR) for FPI investments in debt. The investment cap through VRR has also been raised to Rs 1.5 lakh crore, the RBI said in another circular.

The FPIs can transfer their investments made under the general investment limit to VRR, said RBI, adding that they can invest in exchange-traded funds that invest only in debt instruments.

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It may be mentioned that the RBI had introduced VRR in March 2019. This helped the FPIs to invest in debt markets in India.

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