RBI Eases FPI Bond Investment Norms and Expands FAR

The Reserve Bank of India (RBI) has significantly liberalised the investment framework for Foreign Portfolio Investors (FPIs) in Government Securities by simplifying investment categories, removing security-specific investment restrictions and expanding the scope of the Fully Accessible Route (FAR).

The changes are aimed at enhancing foreign participation in India’s government debt market and improving market liquidity.

1. Security-Wise Investment Cap Under General Route Removed

A key relaxation introduced by the RBI is the removal of the 30% security-wise cap on aggregate foreign investment in a specific Central Government Security under the General Route.

Earlier, aggregate FPI investment in an individual Government Security was subject to a ceiling of 30% of the outstanding stock of that security. With the removal of this restriction, FPIs will have greater flexibility in allocating investments across eligible securities.

2. General and Long-Term Investment Categories Merged

The RBI has also streamlined the investment framework by merging the existing:

• General Investment Route; and
• Long-Term Investment Route

into a single unified investment framework.

The consolidation is expected to simplify compliance requirements and make the Government Securities market more accessible for foreign investors.

3. Fully Accessible Route (FAR) Expanded

The RBI has expanded the scope of the Fully Accessible Route (FAR) by including additional long-tenor Government Securities.

The expansion allows FPIs unrestricted investment access in selected Government Securities without being subject to overall FPI investment limits.

4. Additional Government Securities Included Under FAR

The following Government Securities have been added to the Fully Accessible Route:

• 6.68% GS 2040
• 7.24% GS 2055
• 7.71% GS 2066

These securities will now be available for investment by FPIs under the FAR framework.

5. Inclusion of Longer-Duration Government Bonds

The revised framework also extends FAR coverage to include Government Bonds with maturities of:

• 15 years
• 30 years
• 40 years

This broadens the range of long-term investment opportunities available to foreign investors and supports development of the long-end of the sovereign yield curve.

6. Impact of the Reforms

The reforms are expected to:

• Enhance foreign participation in Government Securities;
• Improve liquidity in the sovereign debt market;
• Simplify the regulatory framework for FPIs;
• Increase attractiveness of Indian Government Bonds to global investors; and
• Support the continued internationalisation of India’s debt market.

7. Objective of the RBI Measures

The RBI’s decision is aimed at creating a more investor-friendly and efficient framework for foreign investment in Government Securities.

By removing security-wise limits, consolidating investment routes and expanding the Fully Accessible Route, the RBI seeks to deepen the Government Securities market, attract long-term foreign capital and further integrate India’s bond market with global financial markets.