Non-residents can invest in Indian companies’ non-convertible debentures and commercial papers via rupee accounts
Non-residents can now invest in non-convertible debentures or bonds and commercial papers issued by an Indian company through rupee account. The Reserve Bank of India has notified the amendment in law to facilitate debt investment. Experts say such a move will add to the attraction of Indian debt market while also aiding in internationlaisation of Indian rupee.
“Persons resident outside India that maintain a rupee account in terms of regulation 7(1) of Foreign Exchange Management (Deposit) Regulations, 2016 may purchase or sell dated Government Securities/treasury bills and non-convertible debentures/bonds and commercial papers issued by an Indian company, as per terms and conditions specified by the Reserve Bank,” the notification said.
Further, it added that the amount of consideration paid by persons resident outside India for their purchases shall be out of funds held in their rupee account, maintained in terms of Foreign Exchange Management (Deposit) Regulations, 2016. Changes to these regulations have been made effective from date of publication of the notification, which is October 1.
Decoding the notification, Hemen Asher, Partner at Bhuta Shah & Co LLP, said that sometime back the RBI had permitted the usage of the Special Rupee Vostro Account (SRVA) for exporters and NRIs to facilitate investments and permitted business purposes in India. RBI, via notification dated September 29, has taken further steps to enhance the usage of INR as a base currency.
The notification now permits NRIs to maintain rupee balances in SRVAs and utilize the same to make investments in Government Securities, treasury bills and NCDs / Bonds and commercial paper issued by Indian corporates. “This measure will enhance the attractiveness of Indian debt securities (government or otherwise) and help them raise capital at attractive interest rates,” he said. At the same time, the maintenance of INR balances by NRIs will assist in reducing demand for USD and help RBI control the exchange rate to a certain extent in the long run,” he said.
Some experts see this move a boosting prospect of internationalisation of Indian Rupee. Abhishek Srivastava, Regional Head of Risk & Compliance for Howden India, feels that such a move catalyzes rupee internationalisation, bolsters forex reserves, and tempers borrowing costs, propelling GDP growth towards 8 per cent targets while invigorating sectors like infrastructure and renewables. For ease of doing business, it dismantles bureaucratic silos, streamlining FPI inflows and compliance, elevating India’s World Bank ranking through investor-friendly norms. Yet, “amid global headwinds, vigilant risk management remains imperative to harness this liberalization without forex vulnerabilities derailing sustainable progress,” he said.
However, some experts feel that the use of rupee account will put a check. The core sourcing of funds rule in the new guidelines is that the money for investing in GS Sec/T Bills, non-convertible debentures/bonds, and commercial papers must come exclusively out of funds held in their rupee account, maintained under the specified regulation.
”This requirement serves as a controlling mechanism,” said Moksha Kalyanram Abhiramula Managing Partner at La Mintage Legal LLP. “By mandating the use of the specific rupee account, the Reserve Bank of India ensures that capital flows for these debt investments are managed and monitored within a controlled regulatory framework. “ Furthermore, the entire process is subject to the “terms and conditions specified by the Reserve Bank.”
Published on October 2, 2025