RBI rationalises FII investment in bonds, removes sub-limits
Mumbai: The Reserve Bank Monday announced rationalisation of FII investment in bonds, including G-Secs, by doing away with various categories, a step to attract more foreign inflows to fund widening current account deficit.
"On a review, to simplify the existing limits, it has now been decided to merge the existing debt limits into two broad categories," RBI said in a notification.
The first category will consist of government securities of USD 25 billion which merges USD 10 billion for investment limit in short-term government papers, including Treasury Bills, and USD 15 billion for long-term government papers.
The second category is for the corporate debt with a limit of USD 51 billion, including a sub-limit of USD 25 billion each for bonds of infrastructure sector and non-infrastructure sector, and USD 1 billion for QFIs (Qualified Foreign Investors) in non-infrastructure sector.
"The above changes will come into effect from April 1, 2013," it said.
Hit by high gold and petrol imports and slowdown in exports, current account deficit-- the difference between inflow and outflow of foreign currency-- touched a record high of 6.7 percent in October-December period of 2012-13.
The Current Account Deficit (CAD) can be financed only through foreign inflows, Finance Minister P Chidambaram had said.
The eligible investors for these two categories are FIIs, QFIs and Long terms investors registered with SEBI Sovereign Wealth Funds (SWFs), multilateral agencies, pension and insurance and central banks of other countries.
In case of investment in G-secs category, eligible investors may invest in treasury bills only up to USD 5.5 billion within the limit of USD 25 billion.
In the other category, investors may invest in commercial papers only upto USD 3.5 billion within the limit of USD 51 billion.
However, it said, the Non-Resident Indians are not subject to any limit for investment in Government Securities as well as corporate debt. They will continue to be regulated as per existing guidelines.