The Reserve Bank of India on Monday said it plans to expand the investment basket of eligible instruments for foreign portfolio investors (FPIs) under the corporate bond route to include unlisted debt securities and securitised debt instruments.
The RBI, in a statement, said it is doing so in consultation with the Ministry of Finance.
Unlisted debtAccording to the draft circular issued by the central bank, under the unlisted debt securities, FPIs can invest in the primary issues of non-convertible debentures (NCDs)/ bonds by a public company issued in demat form, provided that the issuing company does not use the borrowing proceeds for real estate activities, purchase of land, investing in capital market or on-lending to other entities.
In this regard, the custodian banks of FPIs will have to ensure compliance with this condition based on an undertaking from the issuing company.
When it comes to securitised debt instruments, the RBI said FPIs can invest in any certificate or instrument issued by a special purpose vehicle (SPV) set up for securitisation of asset/s where banks, financial institutions or non-banking finance companies are originators; and any certificate or instrument issued and listed in terms of the SEBI ‘Regulations on Public Offer and Listing of Securitised Debt Instruments, 2008’.
The RBI has invited comments/ feedback on the draft circular by May 25. In November 2015, the central bank had permitted FPIs to acquire NCDs/bonds, which are under default, either fully or partly, in the repayment of principal on maturity or principal instalment in the case of amortising bond. The revised maturity period of such NCDs/bonds, restructured based on negotiations with the issuing Indian company, should be three years or more.