RBI hikes cap on FII funds in government, corporate bonds

24 Jan 2013

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The Reserve Bank of India today hiked the investment limits for foreign institutional investors (FIIs) in government securities and corporate bonds by $5 billion each, taking the total cap in domestic debt to $75 billion, with a view to reducing the current account deficit.

Further liberalising the rules, the three-year lock-in period for FIIs purchasing government securities (G-Secs) for the first time has been done away with, RBI said in a statement from Mumbai.

The sub-limit of $10 billion for investment by FIIs and long-term investors in G-Secs stands enhanced by $5 billion, it said. Further, the limit in corporate debt, other than infrastructure sector, stands enhanced from $20 billion to $25 billion, RBI said.

With increase of $5 billion in each of the two categories, FIIs and long-term investors can now invest $25 billion in G-Secs and $50 billion in corporate debt instruments, taking the total to $75 billion.

The earlier FII investment limit in G-Secs was $20 billion and for corporate debt it was $45 billion, including sub-limit of $billion for infrastructure bonds.

The RBI further said, "Residual maturity condition shall not be applicable for the entire sub-limit (in GSecs) of $15 billion but such investments will not be allowed in short-term paper like Treasury Bills, as hitherto".

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