The Reserve Bank of India through circular dated February 26, 2021 has relaxed norms for Investment by Foreign Portfolio Investors (FPI) in Defaulted Bonds. FPI investments in corporate bonds are subject to a minimum residual maturity requirement, short-term investment limit and the investor limit in terms of the Directions. However, FPI investments in security receipts and debt instruments issued by Asset Reconstruction Companies and debt instruments issued by an entity under the Corporate Insolvency Resolution Process as per the resolution plan approved by the National Company Law Tribunal under the Insolvency and Bankruptcy Code, 2016 are exempt from these requirements.
RBI has decided to exempt investments by FPI in 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 from the minimum residual maturity requirement, short-term investment limit and the investor limit.
