Masala Bonds are Out of Corporate Bond Limit for FPIs

The limit of corporate bond investment for foreign investors is increased by RBI.
The step is a result of rupee-denominated bonds, or Masala bonds, to be taken out from the ambit of total debt investment limit.

• At present, the limit for investment by foreign portfolio investors (FPIs) in corporate bonds is Rs 2,44,323 crore. 
• This includes issuance of masala bonds overseas by resident entities of Rs 44,001 crore
• Masala Bonds are presently reckoned both under combined corporate debt limit (CCDL) for FPI and external commercial borrowings (ECBs).
• The amount of Rs 44,001 crore arising from the shifting of Masala bonds will be released for FPI investment in corporate bonds over the next two-quarters.

“With effect from October 3, 2017, Masala bonds will no longer form part of the limit for FPI investments in corporate bonds. They will form part of the ECBs and will be monitored accordingly,” the RBI said. 

• Rs 9,500 crore in each quarter will be available only for investment in infrastructure sector by long term FPIs
• Long-term FPIs will continue to be eligible to invest in sectors other than infrastructure.

Masala Bonds - All You Need to Know