FPI’s Permitted to Invest in Municipal Bonds

The Reserve Bank of India issued a notification on April 25, 2019 allowing foreign portfolio investment (“FPI”) in municipal bonds, subject to the following conditions:

  • FPI in Municipal Bonds will have to adhere to the same limits as set for FPI in state development loans. The limit for FPI investment in state development loans is 2% of outstanding stock of securities as under Circular No. RBI/2018-19/152, dated March 27, 2019.
  • All other conditions for FPI investment in debt remain unchanged.
  • Basis the aforesaid, the Securities and Exchange Board of India (“SEBI”) issued a similar notification dated May 8, 2019. This step is aimed at broadening the accessibility of debt instruments in India to non-resident investors.