{"id":3116,"date":"2021-03-09T05:53:28","date_gmt":"2021-03-09T05:53:28","guid":{"rendered":"https:\/\/swaritadvisors.com\/blog\/?p=3116"},"modified":"2021-03-09T05:53:31","modified_gmt":"2021-03-09T05:53:31","slug":"rbi-relaxes-norms-for-investment-by-fpi-in-defaulted-bonds","status":"publish","type":"post","link":"https:\/\/swaritadvisors.com\/blog\/rbi-relaxes-norms-for-investment-by-fpi-in-defaulted-bonds\/","title":{"rendered":"RBI Relaxes Norms for Investment by FPI in Defaulted Bonds"},"content":{"rendered":"\n<p class=\"has-drop-cap\">The\nReserve Bank of India or RBI, by way of Notification No RBI\/ 2020 \u2013 21\/ 105 A.P\n(DIR Series) Circular No 12, issued on 26.02.2021, has relaxed the norms\nconcerning Investment by FPI in Defaulted Bonds. Further, the acronym FPI\nstands for Foreign Portfolio Investors.<\/p>\n\n\n\n<p>Also,\nthe said relaxations are issued under the provisions of sections 10 (4) and 11 (1) of the Foreign Exchange Management Act 1999\nand are without any prejudice to permissions\/ approvals, if in case any,\nnecessary under any other law.<\/p>\n\n\n\n<p>In\nthis learning blog, we will cover in detail the concept of Foreign Portfolio\nInvestor, together with the relaxations offered in the Investment by FPI in\ndefaulted bonds.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a3a8c683469c\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a3a8c683469c\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/swaritadvisors.com\/blog\/rbi-relaxes-norms-for-investment-by-fpi-in-defaulted-bonds\/#Concept_of_Foreign_Portfolio_Investor\" title=\"Concept of Foreign Portfolio Investor\">Concept of Foreign Portfolio Investor<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/swaritadvisors.com\/blog\/rbi-relaxes-norms-for-investment-by-fpi-in-defaulted-bonds\/#Reasons_for_Relaxing_Norms_for_Investment_by_FPI_in_Defaulted_Bonds\" title=\"Reasons for Relaxing Norms for Investment by FPI in Defaulted Bonds\">Reasons for Relaxing Norms for Investment by FPI in Defaulted Bonds<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/swaritadvisors.com\/blog\/rbi-relaxes-norms-for-investment-by-fpi-in-defaulted-bonds\/#Regulations_and_Notification_considered_for_Relaxing_Norms\" title=\"Regulations and Notification considered for Relaxing Norms\">Regulations and Notification considered for Relaxing Norms<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/swaritadvisors.com\/blog\/rbi-relaxes-norms-for-investment-by-fpi-in-defaulted-bonds\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/swaritadvisors.com\/blog\/rbi-relaxes-norms-for-investment-by-fpi-in-defaulted-bonds\/#Official_Notification_passed_by_the_Reserve_Bank_of_India\" title=\"Official Notification passed by the Reserve Bank of India\">Official Notification passed by the Reserve Bank of India<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Concept_of_Foreign_Portfolio_Investor\"><\/span>Concept of Foreign Portfolio Investor<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The\nterm FPI or Foreign Portfolio Investor means a\nperson who fulfils the eligibility criteria as specified by Rule 4 of the FPI\nRegulations and has been duly registered under the provisions of Chapter II. <\/p>\n\n\n\n<p>Further, FII (Foreign Institutional Investor) and QFI\n(Qualified Foreign Investors) holding a valid registration certificate for the\nperiod of three years for which charged fees have been paid are considered as FPI.<\/p>\n\n\n\n<p>In layman words, a\nForeign Portfolio Investor is a foreign investor who invests in Indian shares\nand securities for not more than 10% of the total securities. Also, the same\nsatisfies the criteria prescribed by the regulations as well. <\/p>\n\n\n\n<p>Further, it shall be noted\nthat FPI permits the investors to buy stocks or other financial assets from the\nIndian securities market. However, FPI does not provide the investor with a direct\nownership of financial assets.<\/p>\n\n\n\n<p>Also, it shall be taken into\nnotice that FPI is bifurcated into three categories based on the risk profile,\nwhich are as follows:<\/p>\n\n\n\n<ul><li>Category I or Low Risk;<\/li><li>Category II or Moderate Risk;<\/li><li>Category III or High Risk<\/li><\/ul>\n\n\n\n<p><strong>Also, Read:<\/strong> <mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/swaritadvisors.com\/learning\/money-changer-license-from-rbi-complete-guide-on-amc-license\/\">Money Changer License from RBI: Complete Guide on AMC License<\/a><\/mark><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Reasons_for_Relaxing_Norms_for_Investment_by_FPI_in_Defaulted_Bonds\"><\/span>Reasons for Relaxing Norms for Investment by FPI in Defaulted Bonds<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In order to further increase and boost FPIs (Foreign Portfolio Investments) in the corporate bond segment, the Reserve Bank of India (<a href=\"https:\/\/www.rbi.org.in\/\">RBI<\/a>) has decided to exempt FPI investment in the defaulted corporate bonds from the short term limit and the minimum residual maturity condition under the MTF (Medium Term Framework).<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Regulations_and_Notification_considered_for_Relaxing_Norms\"><\/span>Regulations and Notification considered for Relaxing Norms<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The different regulations and notifications\nconsidered for relaxing investment norms for Foreign Portfolio Investors are as\nfollows:<\/p>\n\n\n\n<ul><li>Foreign Exchange\nManagement (Debt Instruments) Regulations 2019, notified through FEMA 396\/ 2019\n\u2013 RB, dated 17.10.2019;<\/li><li>&nbsp;A.P (DIR Series) Circular No 31, dated\n26.11.2015;<\/li><li>A.P (DIR Series)\nCircular No 31, dated 15.06.2018;<\/li><li>Statement on\nDevelopmental &amp; Regulatory Policies, dated 05.02.2021;<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In a nutshell, FPIs or Foreign Portfolio Investors\nare eligible to invest in the debt instruments and security receipts issued by\nAMCs (Asset Management Companies). Also, they are eligible to invest in the\ndebt instruments offered by an entity under CIRP (Corporate Insolvency\nResolution Process), based on the resolution plan approved by the NCLT\n(National Company Law Tribunal) under the provisions of Insolvency and\nBankruptcy Code 2016. <\/p>\n\n\n\n<p>Moreover, these investments are exempt from the\nshort term and minimum residual maturity condition under MTF (Medium Term\nFramework).<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Official_Notification_passed_by_the_Reserve_Bank_of_India\"><\/span>Official Notification passed by the Reserve Bank of India<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n<a href=\"https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2021\/03\/Official-Notification-passed-by-the-Reserve-Bank-of-India.pdf\" class=\"pdfemb-viewer\" style=\"\" data-width=\"max\" data-height=\"max\"  data-toolbar=\"bottom\" data-toolbar-fixed=\"off\">Official-Notification-passed-by-the-Reserve-Bank-of-India<br\/><\/a>\n<p class=\"wp-block-pdfemb-pdf-embedder-viewer\"><\/p>\n\n\n\n<p><strong>Also, Read:<\/strong> <mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/swaritadvisors.com\/learning\/importance-of-nbfcs\/\">Importance of NBFCs: A Priority Sector for the RBI<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Reserve Bank of India or RBI, by way of Notification No RBI\/ 2020 \u2013 21\/ 105 A.P (DIR Series) Circular No 12, issued on 26.02.2021, has relaxed the norms concerning Investment by FPI in Defaulted Bonds. Further, the acronym FPI stands for Foreign Portfolio Investors. Also, the said relaxations are issued under the provisions [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":3118,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[50,56],"tags":[472],"acf":[],"_links":{"self":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/3116"}],"collection":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/comments?post=3116"}],"version-history":[{"count":2,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/3116\/revisions"}],"predecessor-version":[{"id":3120,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/3116\/revisions\/3120"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/media\/3118"}],"wp:attachment":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/media?parent=3116"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/categories?post=3116"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/tags?post=3116"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}