RBI Maintains Foreign Portfolio Investment Debt Caps, Increases FY27 Investment Limit

Reserve Bank of India Retains FPI Investment Limits, Increases Overall Cap

The Reserve Bank of India (RBI) has released a circular on Monday, outlining the foreign portfolio investor (FPI) investment limits for the financial year 2026-27. The RBI has retained the percentage limits for FPI investments in debt markets, while increasing the overall investment cap in line with the expansion of the bond market.

According to the circular, the limits for FPI investment under the general route will remain unchanged. The limits for FPI investment in Government Securities (G-Secs), State Government Securities (SGSs), and corporate bonds shall remain at 6 per cent, 2 per cent, and 15 per cent, respectively. However, in absolute terms, the investment limits have been revised upward.

Table: Revised FPI Investment Limits

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The RBI has also maintained the allocation of incremental increases in G-Sec limits between the 'General' and 'Long-term' categories at a 50:50 ratio. For SGSs, the entire increase in limits has been added to the 'General' category.

Government securities (G-Secs) and State Government Securities (SGSs) are bonds issued by the central and state governments to raise money for spending and development. Foreign Portfolio Investors (FPIs) are allowed to invest a fixed share of these bonds, ensuring steady foreign investment without creating excessive dependence on global funds.

Higher overall limits help bring in more capital, improve liquidity in bond markets, and support government borrowing at stable interest rates. The RBI has clarified that investments in specified securities will continue to be counted under the Fully Accessible Route (FAR), which allows eligible investors to invest without restrictions.

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In a key change, the RBI said that from April 1, 2026, all investments under the Voluntary Retention Route (VRR) will be subject to the same limits as those under the general route. The RBI has also set the aggregate limit for the notional amount of Credit Default Swaps (CDS) sold by FPIs at 5 per cent of the outstanding stock of corporate bonds. Accordingly, an additional limit of Rs 3,30,464 crore has been specified for FY27.

The RBI has withdrawn its earlier circular dated April 3, 2025, which had specified the limits for FY26. The move aims to maintain stability in foreign investment flows into the debt market while allowing higher participation in line with the growth of India's bond market.