RBI regulates FPI investments in debt and overseas the reclassification framework. Statement II is a correct description of RBI's role. Statement I is a claim about market behavior which is plausible under certain conditions, making option A the most likely intended answer if II is definitely correct.
This measure was aimed at attracting more foreign capital inflow to support the Indian rupee, which was facing depreciation pressure at the time. - Increasing foreign investment limits in debt markets (like G-secs) helps increase the supply of foreign currency (US Dollars) in the Indian market, which can strengthen the demand for the Indian Rupee, potentially supporting its value. - Foreign Institutional Investors (FIIs, now largely replaced by Foreign Portfolio Investors - FPIs) registered with SEBI are the primary channels through which foreign investments are made in the Indian securities market under specified limits and regulations. Therefore, eligibility was indeed restricted to such registered entities. - The enhancement was specifically for investments in government securities and corporate bonds, not "all categories of investments across the board", which would include equities, alternative investment funds, etc. 25. Which of the following statements is/are correct about Foreign Portfolio Investments (FPI) in 2024-25 ? I. The Indian Rupee (INR) moved in a narrow range with low volatility despite FPI outflows. II. RBI set investment limits for FPIs in debt instruments and Credit Default Swaps. III. FPI investment limits in government securities and corporate bonds remained unchanged. IV. RBI issued an operation framework for reclassification of FPI investments beyond permitted limits.
Asked in APPSC Group II Mains paper 2 2025 · Topic: Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI) (Impact of FPI: Capital Market Development, Volatility, Exchange Rate, Balance of Payments)
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Answer: A. I and II only
Read the notes: Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI) →
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