Unified Investment Limits and Enhanced Exit Flexibility for FPIs
Manisha Ghosh, Senior Executive | finserv@vinodkothari.com
Investment limits under Voluntary retention route (Rs. 2,50,000 crore) for investment in corporate bonds and G-secs have been merged and made a part of the limit assigned for regular investments by FPIs under General Route (15%, 2% and 6% of outstanding stock of Corporate debt securities, State Government securities and Central Government respectively); as a result, FPIs that commit to keep funds for at least 3 years may escape the restrictions applicable in case of corporate bonds relating to minimum residual maturity requirement and issue-wise limits on single FPI (not exceeding 50% of any issue). This introduces significant scope for those FPIs that are sure of staying invested in India for a long term, avoiding opportunism while granting them significant operational flexibility.
The Indian market has witnessed a sharp and sustained decline in FPI investments over the past few years, reflecting a clear shift toward net outflows. The data reflects a structural decline in FPI investments over the period, transitioning from strong inflows in 2020 to persistent net withdrawals from 2022 onwards. The brief stabilization in 2024 appears temporary rather than a trend reversal, suggesting continued caution or reallocation by FPIs in recent financial years.