The Reserve Bank of India (“RBI”) vide A.P. (DIR Series) Circular No. 12 dated February 26, 2021 has allowed certain relaxations in investment by Foreign Portfolio Investors (“FPIs”) in defaulted bonds.
Under the RBI’s Directions on Investment by Foreign Portfolio Investors (FPI) in Debt issued vide A.P. (DIR Series) Circular No. 31 dated June 15, 2018 (“Directions”), FPI investments in security receipts and debt instruments issued by asset reconstruction companies as well as debt instruments issued by an entity as per a resolution plan approved under the Insolvency and Bankruptcy Code, 2016 were exempted from the minimum residual maturity requirement, the short-term investment limit and the investor limit prescribed under the Directions.
RBI has now exempted FPI investments in non-convertible debentures/ corporate bonds, which are under default (either fully or partly) in the repayment of principal on maturity or principal instalment in the case of amortising bonds, also from the aforesaid minimum residual maturity requirement, the short-term investment limit and the investor limit prescribed under the Directions.
Please find a copy of the Directions updated till February 26, 2021 here.
This update has been contributed by Aastha (Partner) and Aditi Singh Kashyap (Associate).
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