The aggregate limit of the notional amount of credit default swap (CDS) that can be sold by foreign portfolio investors (FPIs) has been pegged at ₹2,22,623 crore for FY23, according to the Reserve Bank of India.
Selling of CDS protection by FPIs is subject to a limit – 5 per cent of the outstanding stock of corporate bonds, per the operational instructions relating to transactions in CDS by FPIs, issued by RBI in February 2022..
Debt instruments received by FPIs as deliverable obligation and debt instruments purchased by FPIs for meeting deliverable obligation in physical settlement of CDS contracts shall be reckoned under the investment limits for corporate bonds, RBI said.
FPI limit
The revised FPI limit across Government Securities (G-Secs), State Development Loans (SDLs) and Corporate Bonds for FY23 has been set at ₹11,24,107 crore for the first half/H1 (₹10,14,957 crore in H1 of FY22) and ₹11,72,578 crore in the second half/H2 (₹10,75,637 crore in H2 of FY22).
The limits for FPI investment in G-Secs, SDLs and corporate bonds remain unchanged at 6 per cent, 2 per cent and 15 per cent, respectively, of outstanding stocks of securities for FY 2022-23.