RBI Holds FPI Debt Caps, Raises Total Limit to ₹16.32 Lakh Crore for FY27

In a circular released on Monday, the RBI stated that the limits for FPI investment under the general route will remain unchanged.

It stated, "The limits for FPI investment in Government Securities (G-Secs), State Government Securities (SGSs) and corporate bonds shall remain unchanged at 6 per cent, 2 per cent and 15 per cent respectively".

However, in absolute terms, the investment limits have been revised upward. The total FPI investment limit in debt is set to increase from Rs 14,70,655 crore currently to Rs 15,51,646 crore for the first half of FY27 (April-September 2026) and further to Rs 16,32,640 crore for the second half (October 2026-March 2027).

The RBI 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. These limits ensure 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.

As per the revised limits, the G-Sec General category will increase from Rs 2,89,488 crore to Rs 3,04,003 crore by the second half of FY27, while G-Sec Long-term limits will rise from Rs 1,58,488 crore to Rs 1,73,003 crore.

Similarly, SGS General limits will increase from Rs 1,34,744 crore to Rs 1,57,142 crore, while SGS Long-term limits remain unchanged at Rs 7,100 crore. Corporate bond limits will also see a rise from Rs 8,80,835 crore to Rs 9,91,392 crore during the same period.

The central bank 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.

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.

Further, the RBI has 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 also withdrew 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.

- ANI