The Reserve Bank of India on Thursday raised the investment limit for FPIs in government and corporate bonds to bring in more foreign funds into the market.

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Currently, short-term investments by a foreign portfolio investors (FPI) should not exceed 20 percent of the total investment of that FPI in either central government securities (including treasury bills) or state development loans or corporate bonds.

The short-term investment limit has now been increased from 20 percent to 30 per cent in both cases, the RBI said in a circular.

The central bank has also made relaxation in the voluntary retention route (VRR) for FPI investments in debt. The investment cap through VRR has been doubled to Rs 1.5 lakh crore, the RBI said in another circular.

"FPIs that have been allotted investment limits under VRR may, at their discretion, transfer their investments made under the general investment limit to VRR," the bank said.

FPIs are also allowed to invest in exchange-traded funds that invest only in debt instruments, it added.

The RBI had introduced VRR in March 2019. This helped FPIs to invest in debt markets in India.