Mumbai: The government has ruled out any increase in the investment limit by foreign institutional investors (FIIs) in government securities even as the Reserve Bank of India raised the external commercial borrowing limit for corporates to $500 million under the automatic route in a year, for rupee or dollar expenditure.

''We are not looking at increasing FII (investment) limit in government securities," department of economic affairs secretary Ashok Chawla said.

He said only 65 per cent of FII investment cap of $5 billion in government securities has been exhausted so far and there was no case for reviewing the limit.

The government, however, had doubled the FII investment cap in corporate debt to $6 billion to encourage flow of foreign investment.

Chawla said the RBI's decision to allow companies to bring in $500 million raised abroad under automatic route to India for rupee expenditure is aimed at augmenting dollar flows into the economy.

Henceforth, ECB up to $500 million per borrower per financial year would be permitted for rupee expenditure and / or foreign currency expenditure for permissible end-uses under the automatic route.

''Accordingly, the requirement of minimum average maturity period of seven years for ECB more than $100 million for rupee capital expenditure by the borrowers in the infrastructure sector has been dispensed with,'' Chawla said.

"One of the requirements that RBI has addressed is the issue of rupee liquidity. Our assessment is that there is equal need to address capital flows in terms of dollar, as such government has taken steps to amplify and amend the ECB regulations," Chawla said in a statement.

Chawla said the government has been responding to the evolving macro-economic situation adequately and in a timely manner.

"The current situation is basically and essentially a result of the international volatility in the financial markets," he pointed out.

''The External Commercial Borrowing (ECB) policy has been reviewed to keep it in tune with the evolving macroeconomic situation, changing market conditions, sectoral requirements, the external sector and lessons of experience,'' he said.

''In order to further develop the telecom sector in the country, payment for obtaining license/permit for 3G spectrum will be considered an eligible end-use for the purpose of ECB,'' Chawla added.

At present, ECB proceeds are required to be parked overseas until actual requirement in India and such proceeds can be invested in the following liquid assets like deposits or certificate of deposit offered by banks rated not less than AA(-) by Standard and Poor / Fitch IBCA or Aa3 by Moody's; deposits with overseas branch of an AD bank in India; and Treasury bills and other monetary instruments of one year maturity having minimum rating as indicated above.

It has now been decided that henceforth the borrowers will be extended the flexibility to either keep these funds offshore as above or keep it with the overseas branches / subsidiaries of Indian banks abroad or to remit these funds to India for credit to their rupee accounts with AD Category I banks in India, pending  utilisation for permissible end-uses. However, as hitherto, the rupee funds will not be permitted to be used for investment in capital markets, real estate or for inter-corporate lending.