RBI provides clarity on investment limits by FPI in government securities through FAR

Aliff FazelbhoySenior Partner, ALMT Legal, Advocates & Solicitors

The Reserve Bank of India (“RBI”) has issued a circular bearing number RBI/2019-2020/214 A.P. (DIR Series) Circular No. 30 dated 15 April 2020 (“Circular 30/2020”) clarifying that:

(i) The aggregate investment limits for Foreign Portfolio Investors (“FPIs”) in Government securities (G-secs) and State Development Loans (SDLs) will remain unchanged at 6% and 2% respectively, of outstanding stocks of securities for the financial year 2020-2021. These are unchanged from the previous financial year 2019-2020.

(ii) All existing FPI investments in the specified securities as identified under the Fully Accessible Route will be reckoned only under the FAR and the calculation of outstanding stock of G-secs and utilization levels of limits under the MTF has been accordingly adjusted by the RBI.

This addresses the ambiguity highlighted in our newsflash as circulated on 3 April 2020 which gives an overview of the salient features of the FAR (“Newsflash”). Please click here to refer to our earlier Newsflash.

In addition to the above, Circular 30/2020 provides that:
1. The allocation of incremental changes in the G-sec limit (in absolute terms) over the two sub-categories i.e. ‘General’ and ‘Long-term’ is being retained at 50:50 for financial year 2020-21.
2. There has been an increase in limits for SDLs (in absolute terms) in the sub-category ‘General’ of SDLs.

Disclaimer

This news flash has been written for the general interest of our clients and professional colleagues and is subject to change. This news flash is not to be construed as any form of solicitation. It is not intended to be exhaustive or a substitute for legal advice. We cannot assume legal liability for any errors or omissions. Specific advice must be sought before taking any action pursuant to this news flash.

For further clarification and details on the above, you may write to the Exchange Control team comprising of among others Ms. Siddhi Ghatlia (Partner) at sghatlia@almtlegal.com , Ms. Khusbu Jasani (Senior Associate) at kjasani@almtlegal.com and Ms. Amishi Vira (Associate) at avira@almtlegal.com.


Contributing Advisors

Ahetesham Ahmed A. ThaverSenior Associate, ALMT Legal, Advocates & Solicitors