RBI opens up more debt space for FPIs

As planned earlier, the Reserve Bank of India (RBI) on Tuesday increased the investment limit of foreign portfolio investors (FPIs) in central government bonds to Rs 2 lakh crore, from the existing Rs 1,79,500 crore, in two tranches by July 5.

FPIs can only invest in securities that have a residual maturity of three years. Even so, foreign investors have exhausted their limits in government securities, indicating the huge appetite for these bonds.

In addition to the central government bonds, FPIs can also invest up to Rs 14,000 crore in state development loans, from Rs 7,000 crore now. Including for long-term investors, FPIs' limits in Indian government and state government securities go up to Rs 2,14,000 crore from Rs 1,86,500 crore now.

The limits will be increased effective April 4 and July 5 respectively. The increase in limits is part of RBI's medium-term framework (MTF), where it denominated the investment limits in rupees from dollars earlier to open up more space for foreign debt investors.

"As announced in the MTF, the limits for investment by FPIs in central government securities for the next half-year are proposed to be increased in two tranches, i.e., by Rs 105 billion (Rs 10,500 crIn addition to the central government bonds, FPIs can also invest up to Rs 14,000 crore in state development loans, from Rs 7,000 crore nowore) from April 4, 2016 and by Rs 100 billion (Rs 10,000 crore) from July 5, 2016 respectively," RBI said in a statement on its website, adding an additional amount of Rs 3,500 crore each in those two tranches can be invested by FPIs in state development loans.

The central bank also said any limit remaining unutilised by the long-term investors at the end of a half-year would be made available as additional limit to the investors in the open category for the following half-year.