Limit of investment for outstanding corporate bond for Foreign Portfolio Investment in Union Budget 2020-21 has been extended upto

Question

UnlockIAS · Accepted Answer

Correct — D, 15%. In the Union Budget 2020-21 (presented on 1 February 2020), Finance Minister Nirmala Sitharaman proposed raising the limit for Foreign Portfolio Investors (FPIs) in outstanding corporate bonds from 9% to 15% of the outstanding stock of corporate bonds. The Reserve Bank of India gave effect to this on 30 March 2020 for FY2020-21, the aim being to deepen the corporate bond market and draw more foreign debt investment.

Why the other options are wrong — (a) Wrong — 9% was the PREVIOUS ceiling that existed before Budget 2020-21; the Budget raised it, so 9% is the old limit, not the extended one.  (b) Wrong — 10% was floated in some pre-budget discussion but was not the figure announced; the limit was extended to 15%.  (c) Wrong — 12% is a distractor between the old (9%) and new (15%) limits; it was never the notified cap.

Concept: Foreign Portfolio Investors (FPIs) are overseas investors — funds, institutions and individuals — registered with SEBI who invest in Indian securities, including the debt market. Their investment in Indian corporate bonds is capped as a percentage of the outstanding stock of such bonds. Union Budget 2020-21 raised this cap from 9% to 15% to enlarge the pool of foreign money the corporate bond market can absorb.

State PCS 2020 Q135 — Economy PYQ with Answer

State PCS 2020 Q135 — Economy PYQ with Answer