Foreign portfolio investors can now invest in municipal bonds, markets regulator Sebi said in a circular May 8.
The circular comes almost two weeks after the Reserve Bank of India permitted FPIs to invest in municipal bonds as a measure to broaden access of non–resident investors to debt instruments in the country.
As per the RBI, foreign investment in municipal bonds should be within the limits set for FPI investment in State Development Loans (SDLs).
The limits for FPI investment in SDLs is 2 per cent of outstanding stock of securities.
All other existing conditions for investment by FPIs in the debt market remain unchanged, the central bank had said in a circular on April 25.
In 2017, Sebi eased rules governing the issuance of municipal bonds in order to boost such bond market. It allowed municipalities with surplus in their books in three immediately preceding financial years to issue public debt securities.