Master Direction explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
This Master Direction collects the Reserve Bank's directions on how non-residents invest in Indian debt. Paragraph 3 names five channels: the General Route, the Voluntary Retention Route (VRR), the Fully Accessible Route (FAR), the Sovereign Green Bonds scheme in an IFSC, and the Special Rupee Vostro Account route. NRIs have their own part. This article is one overview of all of them.
This is the Master Direction - Reserve Bank of India (Non-resident Investment in Debt Instruments) Directions, 2025 (Notification No. FMRD.FMD.11/14.01.006/2024-25, January 07, 2025), as per the Master Direction, updated as on June 05, 2026. Under the General Route an FPI is held to investment limits of 6 per cent of the outstanding stock of Central Government securities (other than specified securities), 2 per cent of State Government securities and 15 per cent of corporate bonds. The VRR needs a retention period of at least three years, and the FAR lets non-residents invest in specified Central Government securities without an investment limit. A breach of an investment limit means the transaction is reversed.
What the Master Direction is, and its authority
The Master Direction is a direction to Authorised Persons. Its cover letter says the Reserve Bank has issued it "in exercise of the powers conferred under section 6, read with section 47 of the Foreign Exchange Management Act, 1999", listing four sets of regulations (Permissible Capital Account Transactions, Borrowing and Lending, Deposit, and Debt Instruments). The Directions themselves are made under sections 10(4) and 11(1) of the Act and section 45W of the Reserve Bank of India Act, 1934. They are without prejudice to permissions required under any other law. See the Act articles on section 10 and sections 11 and 12. The Directions apply with immediate effect to all transactions by eligible non-residents in debt instruments (paragraph 1). The Schedule that lists the debt instruments sits in the Debt Instruments Regulations, 2019. For advice on a non-resident debt investment, see our FEMA advisory service.
Paragraph 2: definitions that matter
Some definitions in paragraph 2 do the work later: "Corporate debt securities" (instruments in sub-paragraph A of paragraph 1 of Schedule 1 to the 2019 Regulations other than Government securities and municipal bonds); "Committed Portfolio Size" (the amount allotted to an FPI under the VRR); "Default bonds"; "Specified securities" (Central Government securities notified for investment under the FAR); "Retention Period"; and "Minor violations" (those that the custodians consider unintentional, temporary or beyond the FPI's control, and corrected on detection). "Foreign Portfolio Investor" means a person registered under the Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2019. "Real Estate Business" is defined by reference to the Non-debt Instruments Rules, 2019, which are not in the sources consulted.
Paragraph 3: the five channels
| Channel | For whom and what |
|---|---|
| General Route | FPIs, in Government securities and corporate debt securities, within the specified investment limits and macro-prudential limits |
| Voluntary Retention Route | FPIs that commit to remain invested for a stipulated retention period, in Government securities and corporate debt securities, not subject to certain macro-prudential limits of the General Route |
| Fully Accessible Route | Non-residents, in specified categories of Central Government securities, without any restriction |
| Sovereign Green Bonds in an IFSC | Eligible foreign investors, under the Scheme notified by the Reserve Bank (paragraph 7) |
| Special Rupee Vostro Account route | Persons resident outside India investing the rupee surplus balance in a Special Rupee Vostro Account |
Investments by NRIs are in Part 5(B), paragraph 7B: NRIs may invest in the debt instruments in sub-paragraphs (B) and (C) of paragraph 1 of Schedule 1 to the 2019 Regulations, and those investments are not subject to any investment limit under these Directions. See our article on NRI and OCI investment in bonds and government securities.
Paragraph 4: the General Route
Eligible non-residents are FPIs. The limits (paragraph 4.2) as printed:
| Eligible instruments | Investment limit |
|---|---|
| Central Government securities (including Treasury Bills), other than specified securities under the FAR | 6 per cent of the outstanding stock of such securities |
| State Government securities | 2 per cent of the outstanding stock of State Government securities |
| Corporate debt securities | 15 per cent of the outstanding stock of corporate bonds |
The Reserve Bank notifies the absolute values for each financial year. Municipal bonds count under the State Government securities limit. Investments through the VRR and rupee-surplus investments from a Special Rupee Vostro Account are reckoned in the General Route limits, as the notes state.
Government securities (4.3). FPIs may reinvest coupons without any constraint, but the reinvestment is reckoned in the limit; sale or redemption proceeds may be reinvested within two working days, irrespective of the availability of limits in the category. The Clearing Corporation of India Ltd. monitors utilisation. The primary responsibility for complying with limits lies with the FPIs and custodians.
Corporate debt securities (4.4). An FPI may invest only in securities with original or residual maturity above one year, and not in securities with an optionality clause exercisable within a year of investment, debt mutual fund schemes with maturity or Macaulay duration under one year, partly paid instruments, or amortised instruments whose duration is up to one year. Investment by any FPI, including related FPIs, shall not exceed 50 per cent of any issue. Unlisted non-convertible debentures and bonds are subject to end-use restrictions on real estate business, capital market and purchase of land. "To be listed" securities are allowed, and if not listed within the SEBI period the FPI must sell to the issuer or a third party. The maturity and issue-wise limits do not apply to security receipts, debt of an entity under an approved resolution plan, and default bonds; the maturity requirement does not apply to certain securitised instruments; and the issue-wise limit does not apply to multilateral financial institutions.
Paragraph 5: the Voluntary Retention Route
- Eligible investors: FPIs. Instruments: any instrument in Schedule 1 to the 2019 Regulations other than units of mutual funds or ETFs investing less than or equal to 50 per cent in equity, and partly paid instruments; ETFs investing only in debt are allowed. Repos and reverse repos are allowed up to 10 per cent of the FPI's VRR investments.
- Limit and allocation: VRR investments are subject to the General Route limits and are allotted on tap on a first come, first served basis or by auction, as the Reserve Bank announces for each tranche. The maximum limit allotted to an FPI and its related FPIs is 50 per cent of the amount offered if demand exceeds 100 per cent of the amount offered.
- Retention: a minimum of three years, or as the Reserve Bank announces for each tranche, from the date of allotment. An FPI invests at least 75 per cent of its Committed Portfolio Size within three months of allotment and stays at 75 per cent or more at all times on an end-of-day basis; cash in the VRR rupee accounts counts.
- Exit: at the end of the period the FPI may liquidate and exit, shift to the General Route subject to limit, hold to maturity or sale, or continue for an identical additional period. Early exit is by selling to another FPI that abides by the same terms.
- Accounts: separate SNRR account(s) for VRR fund flows, and a separate securities account may be opened. FPI and custodian share responsibility for adhering to the route.
Paragraphs 6 and 7: the Fully Accessible Route and green bonds
Under the FAR (paragraph 6), eligible investors are FPIs, NRIs and OCIs, and any other person the Reserve Bank notifies. "Specified securities" include those in Annex 3, new issuances of 5-year, 7-year, 10-year, 15-year, 30-year and 40-year tenors by the Central Government (including Sovereign Green Bonds in those tenors), and any other security the Reserve Bank notifies. Once designated, they remain eligible until maturity, and FPI investment in them is not subject to any investment limit or macro-prudential control of the General Route. Paragraph 7 lets eligible investors invest in Sovereign Green Bonds in the IFSC under the Scheme the Reserve Bank notified on August 29, 2024.
Paragraph 7A: the Special Rupee Vostro Account route
SRVA holders may invest the rupee surplus balance in Central Government securities (including Treasury Bills) and non-convertible debentures, bonds and commercial papers of an Indian company. Government securities other than specified securities follow the General Route limits; specified securities follow the FAR stipulations; for corporate instruments the General Route limit applies but the one-year maturity requirement and the 50 per cent issue-wise limit do not. Purchases are paid from the SRVA balance and all proceeds and interest are credited to the same account. AD Category I banks open separate security accounts, facilitate access to NDS-OM, and report transactions.
Paragraphs 8 to 14: other facilities, data and violations
Paragraph 8 refers non-residents to separate Reserve Bank Directions for foreign exchange, interest rate and credit derivatives. Paragraph 9 covers FPI trading in the over-the-counter Government securities market, including reporting to NDS-OM within three hours after close of trading hours and settlement on T+1 or T+2 (T+1 only for the NDS-OM web module). Paragraph 10 says amounts are reckoned at face value; paragraph 10A allows FPIs to offer Government securities and non-convertible debentures or bonds as collateral to recognised stock exchanges for exchange traded derivatives; paragraph 10B sends mode of payment and proceeds to paragraphs 2 and 4 of Schedule 1 of the 2019 Regulations. Paragraph 11 lets the Reserve Bank call for information, paragraph 12 lets it publish anonymised data, and paragraph 14 keeps all other FEMA provisions applicable.
Paragraph 13 (violation). A transaction in breach of an applicable investment limit or macro-prudential control "shall not be accepted", and any transaction in breach of an investment limit "shall need to be reversed". Violations by FPIs are subject to regulatory action as SEBI determines; with the custodian's approval an FPI may regularise minor violations immediately on notice and in any case within five working days; custodians report all others to SEBI.
Words left as "[***]" on the page are deleted provisions and are not read. Later changes to limits and tenors, which the Reserve Bank notifies, should be checked.
Need help with debt investment by non-residents?
Which channel fits an investor depends on its status, the instrument and the account used. Our FEMA advisory team can map the route and the custodian conditions before money is committed.
Key takeaways
- Five channels: General Route, VRR, FAR, IFSC Sovereign Green Bonds and the SRVA route; NRIs invest under Part 5(B).
- General Route limits are 6 per cent, 2 per cent and 15 per cent of the outstanding stock of the three categories.
- VRR: at least three years' retention, 75 per cent of the Committed Portfolio Size within three months and thereafter at all times.
- FAR investments in specified securities are not subject to an investment limit.
- A breach of an investment limit is reversed; FPI violations go to SEBI, with five working days for minor ones.
Read next
- Regulations 1 to 7 of the Debt Instruments Regulations, 2019
- FPIs and other foreign investors in debt: Schedule 1
- FPI: foreign portfolio investment in India
- FPI investment limits: sectoral and overall
Disclaimer: Based on the rules, regulations and Reserve Bank Master Directions under the Foreign Exchange Management Act, 1999 that this article names, each in the version and up to the date stated in the article, as consulted on 2 October 2026. Some texts are third-party copies or older prints and are identified as such. Limits, forms and time limits change by amendment and circular; later changes should be checked on the Reserve Bank and Gazette sites. This article is general information, not legal advice; check the official text before acting.