‘RBI’s decision to permit FPIs to invest in debt securities issued by REITs and InvITs is a welcome change. This will provide the desired liquidity, access to new capital pool and flexibility in debt structuring to these young asset classes. RBI’s permission and the amendments to the FEMA (Debt Instruments) Regulations, 2019 were awaited after SEBI allowed REITs and InvITs to issue listed debt securities in December 2017. The investment by FPIs will need to be under the existing Medium-Term Framework or the Voluntary Retention Route. Once the VRR limits are refreshed, some activity can be expected in this space.’ Utsav Johri, Partner, J Sagar Associates (JSA)

Reserve Bank of India

RBI/2021-22/120
A.P. (DIR Series) Circular No. 16

Dated: November 08, 2021

To

All Authorised Persons

Madam / Sir

Investment by Foreign Portfolio Investors (FPIs) in Debt – Review

Attention of Authorised Dealer Category-I (AD Category-I) banks is invited to Schedule 1 to the Foreign Exchange Management (Debt Instruments) Regulations, 2019 notified vide Notification No. FEMA.396/2019-RB dated October 17, 2019, as amended from time to time and the relevant Directions issued thereunder.

Investment by Foreign Portfolio Investors (FPIs) in Debt Review

2. A reference is also invited to the following Directions issued by the Reserve Bank:

a. A.P. (DIR Series) Circular No. 31 dated June 15, 2018, as amended from time to time; and

b. A.P. (DIR Series) Circular No. 34 dated May 24, 2019, as amended from time to time.

3. An announcement was made in the Union Budget 2021-22 that debt financing of Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trusts (REITs) by Foreign Portfolio Investors (FPIs) will be enabled by making suitable amendments in the relevant legislations. Accordingly, it has been decided to permit FPIs to invest in debt securities issued by InvITs and REITs. Necessary amendments to Foreign Exchange Management (Debt Instruments) Regulations, 2019 (Notification No. FEMA 396/2019-RB dated October 17, 2019) have been notified on October 21, 2021 and are annexed to this circular.

4. FPIs can acquire debt securities issued by InvITs and REITs under the Medium-Term Framework (MTF) or the Voluntary Retention Route (VRR). Such investments shall be reckoned within the limits and shall be subject to the terms and conditions for investments by FPIs in debt securities under the respective regulations of MTF and VRR.

5. AD Category-I banks may bring the contents of the circular to the notice of their customers/constituents concerned.

6. The Directions contained in this circular have been issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/approvals, if any, required under any other law.

Yours faithfully

(Dimple Bhandia)
Chief General Manager

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