SEBI lays out rules for FPIs in corporate bonds

The market regulator, Securities Exchange Board of India (SEBI) has come up with new guidelines for permitting well-regulated foreign portfolio investors (FPIs) to trade directly in corporate bonds without any broker. This decision is directed towards developing capital markets trading. However, hedge funds, individuals and other high-risk foreign investors will not get this facility.

Now, FPIs can trade in Indian markets only through brokers who are registered with stock exchanges as their members.

SEBI has amended FPI regulations to allow category I and category II FPIs to have an option to directly access the corporate bond market without brokers, as has been allowed to domestic institutions such as banks, insurance companies and pension funds. The revised norms will be applicable to category-I FPIs that include sovereign wealth funds and central banks as well as category-II ones that include mutual funds and banks.

The market regulator’s move will boost foreign investment in the country. However, it may hamper revenue of Indian brokerage houses that could impact their upcoming couple of quarters' results.