What changed
RBI has expanded the investment scope for SRVA holders to include non-convertible debentures/bonds and commercial papers issued by Indian companies, in addition to existing government securities. The Master Direction on non-resident investment in debt instruments has been updated to reflect this change, including specific provisions for investment limits, compliance responsibilities, and demat account requirements.
What it means for you
Banks acting as AD Category-I can now facilitate a wider range of investments for SRVA holders, potentially increasing demand for corporate debt instruments. This move deepens the corporate bond market and offers SRVA holders more avenues to deploy rupee surplus, but banks must ensure strict adherence to FPI investment limits and compliance responsibilities.
What you must do
- Update internal policies and systems to handle investments in non-convertible debentures/bonds and commercial papers via SRVA.
- Ensure SRVA holders comply with FPI investment limits under the General Route, except for minimum residual maturity and issue-wise limits.
- Facilitate opening of separate demat accounts for SRVA holders to hold these new investments.
- Advise SRVA holders that primary compliance responsibility lies with them and the AD bank maintaining the account.
Who it affects
Authorised Dealer Category-I banks, Persons resident outside India holding SRVA accounts, Indian companies issuing non-convertible debentures/bonds and commercial papers
What instruments are now eligible for SRVA investment?
Non-convertible debentures/bonds and commercial papers issued by an Indian company, as defined in FEMA (Debt Instruments) Regulations, 2019.
Are there any exemptions from FPI limits for these investments?
Yes, the minimum residual maturity requirement and issue-wise limit applicable to FPI investments under the General Route do not apply to SRVA route investments.
Who is responsible for ensuring compliance with investment limits?
The primary responsibility lies with the SRVA holder and the AD Category-I bank where the account is maintained.