FII limit in G-Sec hiked to $20 bn

In a move to attract foreign funds, the Reserve Bank of India has the FII limit for investment in government securities by $5 billion to 20 billion.

The central bank has also allowed Sebi to register long term investors like Sovereign Wealth Funds (SWFs), multilateral agencies, endowment funds, insurance funds, pension funds and foreign central banks, to also invest in government bonds for the entire limit of $20 billion.

“The sub-limit of $ 10 billion (existing $5 billion with residual maturity of 5 years and additional limit of $ 5 billion) would have the residual maturity of three years,” RBI said.

Both the stock market and the rupee pared gains following the announcements as market participants were expecting bolder steps to boost the economy and the currency.

Separately, Indian companies engaged in manufacturing and infrastructure development— those who have foreign exchange earnings— have been allowed to avail themselves of external commercial borrowing (ECB) upto $10 billion to repay rupee loans towards capital expenditure.

The terms and conditions for FII investment in infrastructure debt and the scheme for non-resident investment in Infrastructure Development Funds (IDFs) has been rationalised in terms of lock-in period and residual maturity.

In addition, Qualified Foreign Investors (QFIs) has been allowed to invest in mutual fund (MF) schemes that hold at least 25% of their assets (either in debt or in equity or both) in infrastructure sector under the current $3 billion sub-limit for investment in mutual funds related to infrastructure.