The Reserve Bank of India (RBI) has decided to maintain the existing investment limits for Foreign Portfolio Investors (FPIs) in government and corporate bonds for the financial year 2025-26. This move ensures continuity in foreign investment policies for India's debt market, providing stability to both domestic and international investors.

According to the RBI’s announcement, the limit for FPI investment in central government securities remains unchanged at 6% of the outstanding stock, while the cap for state government securities is set at 2%. Similarly, corporate bonds continue to have an FPI investment ceiling of 15%. By keeping these limits stable, the central bank aims to balance foreign capital inflows while safeguarding domestic economic interests.

For the first half of the fiscal year (April to September 2025), the total FPI investment cap for government securities stands at ₹2.79 trillion (approximately $32.71 billion). This limit will increase slightly in the second half of the fiscal year (October to March 2026) to ₹2.89 trillion. Meanwhile, the total investment limit for corporate bonds has been set at ₹8.22 trillion for the first half, rising to ₹8.80 trillion for the second half.

Recent data suggests that FPIs have utilized only 22.3% of the permitted limit in government bonds and 15.7% in corporate bonds. These figures indicate that there is still significant headroom for foreign investors to increase their participation in India’s debt market. However, the RBI’s decision to maintain the existing limits suggests a cautious approach, likely aimed at preventing excessive volatility and managing external economic risks.

The decision comes at a time when global investors are closely watching India's debt market, particularly after the country’s inclusion in JP Morgan’s Emerging Market Bond Index and other similar indices. The RBI's move ensures that foreign investments remain within controlled limits, preventing any sudden surges or withdrawals that could destabilize the financial system.

By keeping the FPI investment caps unchanged, the RBI signals a stable regulatory environment for investors while maintaining sufficient oversight over foreign capital flows. This decision aligns with the central bank’s broader strategy of gradual financial liberalization while safeguarding economic stability.