Question
Consider the following statements regarding recent RBI
reforms on Foreign Portfolio Investors (FPIs) in corporate debt securities: 1. The Reserve Bank of India (RBI) has removed the short-term investment limit for FPIs in corporate debt. 2. Earlier, FPIs were restricted to investing not more than 25% of any corporate debt issue. 3. The recent reform is aimed at deepening the corporate bond market and attracting more stable foreign investment. Which of the above statements is/are correct?Solution
• Statement 1: Correct. The RBI has scrapped the short-term investment limit for FPIs in corporate debt securities. This makes it easier for FPIs to participate without maturity-linked restrictions. • Statement 2: Incorrect. The earlier rule was not 25% but 50% cap, i.e., FPIs (including related entities) could not invest more than 50% of any single corporate debt issue. • Statement 3: Correct. The reform is explicitly intended to deepen India’s corporate bond market and attract more stable foreign investment, particularly at a time when inflows have been volatile. Hence, the correct answer is 1 and 3 only.
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