FPIs Can Invest In Debt Issued By InvITs, REITS

The Reserve Bank on Monday said FPIs had been permitted to invest in debt securities issued by Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trusts (REITs).

 

Important Highlights

  • Necessary amendments to Foreign Exchange Management (Debt Instruments) Regulations, 2019, had been notified in October. An announcement was made in the Union Budget 2021-22 that debt financing of InvITs and 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, the RBI said in a circular.
  • “FPIs can acquire debt securities issued by InvITs and REITs under the Medium-Term Framework (MTF) or the Voluntary Retention Route (VRR),” it said.
  • 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.

 

Foreign portfolio investment (FPI)

  • Foreign portfolio investment (FPI) is a common way to invest in overseas economies. It includes securities and financial assets held by investors in another country.  
  • Securities (in FPI) include stocks or American Depositary Receipts (ADRs) of companies in nations other than the investor's nation. It also includes bonds or other debt issued by these companies or foreign governments, mutual funds, or exchange-traded funds (ETFs) that invest in assets abroad or overseas. 
  • On a macro-level, foreign portfolio investment is part of a country’s capital account and shown on its balance of payments (BOP). BOP calculates the amount of money flowing from one country to other countries over a financial year. 
  • FPI is relatively liquid depending on market volatility. 

 

Who invests through FPI? 

Individual investors interested in opportunities outside their own country invest via FPI.  It does not give investors direct ownership of a company's assets.