World Economy

India Eases Foreign Investment Rules

India Eases Foreign Investment RulesIndia Eases Foreign Investment Rules

The Reserve Bank of India eased rules governing foreign investment in corporate bonds by excluding rupee-denominated securities from its overall debt limit. The move potentially freed up 440 billion rupees ($6.79 billion) of debt available to offshore investors.

Access to the corporate bonds by foreign investors will be phased in over the next two quarters—270 billion rupees during October-December and 170 billion rupees in January-March, the Reserve Bank of India said in a circular, PTI reported.

Rupee-denominated bonds—more widely known as masala bonds—will now come under rules for external commercial borrowings and issuers will have to take prior permission from the RBI to raise the paper.

Earlier these masala bonds used to be classified under the foreign portfolio investment limit for corporate bonds that stands at 2.44 trillion rupees. This total limit has been fully taken up following massive foreign inflows.

So far this year India has attracted $23.7 billion in debt investment and $6.08 billion in equity purchases, helping the rupee rise 4.8%. “It is in a way further liberalization for foreign investors,” said one official, adding that India’s external debt is in comfortable shape.

India’s total external debt stood at $471.9 billion as of the end of March, of which external commercial borrowings stood at $124.5 billion, according to the RBI data.

Interest in Indian debt has been very steep among foreign investors. This is seen from the high cut-off fees they paid to buy the marginal limits available under corporate debt on Friday.


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