Investments in debt securities in India by non-residents require compliance with an array of Indian foreign exchange and securities regulations. Overseas investors intending to invest in debt instruments in India typically do so either under the Reserve Bank of India’s (“RBI”) framework for external commercial borrowings (“ECB”) or through the route available for foreign portfolio investors (“FPI”) registered with the Securities and Exchange Board of India (“SEBI”). In recent years, the FPI route has become a popular option for overseas investors looking to invest in India’s debt markets on a regular basis as it allows for greater flexibility in terms of interest, repayment terms, security cover and end use of funds in comparison to the ECB route. According to data from the National Securities Depository, FPI investments in the Indian debt markets stood at INR 1.1 trillion in 2024.
In January 2025, the RBI issued Master Direction – Reserve Bank of India (Non-resident Investment in Debt Instruments) Directions, 2025 (“Master Direction”), which, inter alia, consolidates a number of the circulars and directions issued by the RBI on investments in debt instruments by non-resident investors, including FPIs. This note analyzes the key regulatory aspects governing FPI investments in corporate debt securities, particular in light of the Master Direction.
