RBI Maintains Credit Default Swap Cap at 5% and Sets ₹3.3 Trillion Limit for FY27
RBI retains credit default swap cap at 5%, sets ₹3.3 trn limit for FY27
Business Standard
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The Reserve Bank of India (RBI) has retained the credit default swap (CDS) cap at 5% of outstanding corporate bonds while setting a limit of ₹3.3 trillion for the fiscal year 2026-27. Additionally, the overall foreign portfolio investment (FPI) limit in debt instruments will rise to ₹16.33 trillion by March 2027.
- 01RBI retains CDS cap at 5% of corporate bonds.
- 02New limit of ₹3.3 trillion set for FY27.
- 03FPI investment limits in debt instruments increased to ₹16.33 trillion.
- 04Allocation mechanism for G-Sec limits remains unchanged.
- 05Investment ceilings raised in line with expanding securities.
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The Reserve Bank of India (RBI) has announced that the aggregate limit for credit default swaps (CDS) sold by foreign portfolio investors (FPIs) will remain at 5% of the outstanding stock of corporate bonds. For the fiscal year 2026-27, a new limit of ₹3.3 trillion has been established. The overall FPI investment limit in debt instruments will be raised to ₹16.33 trillion for the period from October 2026 to March 2027, up from ₹14.71 trillion currently. The RBI has maintained the investment caps for government securities at 6%, state government securities at 2%, and corporate bonds at 15%. The allocation mechanism for incremental changes in government securities limits will continue to split additions equally between ‘general’ and ‘long-term’ categories, while the entire increase for state government securities will be allocated to the ‘general’ category. Investments in specified securities will remain classified under the fully accessible route (FAR), which is outside macroprudential limits.
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The increase in FPI investment limits may lead to more foreign capital entering the Indian debt market, potentially lowering borrowing costs for companies and the government.
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