RBI vide its Circular No. 05 (circular No.2017-18/64/A.P. (DIR Series) dated 22.09.2017, advised that with effect from October 3, 2017, Masala bonds (Rupee denominated bonds overseas) will no longer form a part of the limit for FPI investments in corporate bonds. These bonds will form a part of the ECBs and will be accordingly monitored. The Masala Bonds are presently reckoned both under Combined Corporate Debt Limit (CCDL) for FPI (Foreign Portfolio Investors) and External Commercial Borrowings (ECBs). After a review by central bank has taken decision that these bonds will form a part of the ECBs and will be accordingly monitored. hereafter, the eliigible Indian entities proposing to issue Masala Bonds are required to approach Foreign Exchange Department, Reserve Bank of India, Central Office, Mumbai as specified in terms of A. P. (DIR Series) Circular No.47 dated June 7, 2017.
At present investment by Foreign Portfolio Investors (FPIs) in corporate bonds is ₹ 244,323 crore out of which issuance of Rupee denominated bonds overseas (Masala Bonds) by resident entities of ₹ 44,001 crore (including pipeline) .Now onward, an amount of ₹ 9,500 crore in each quarter will be available only for investment in infrastructure sector by long term FPIs (i.e., Sovereign Wealth Funds, Multilateral Agencies, Endowment Funds, Insurance Funds, Pension Funds and Foreign Central Banks). The definition of ‘Infrastructure’ shall be the same as defined under the Master Direction on ECBs issued by the Reserve Bank of India. Long term FPIs will continue to be eligible to invest in sectors other than infrastructure as usual.As per the above notification all other existing conditions for investment by FPIs in the debt market remain unchanged.