The Reserve Bank of India has revised rules for foreign portfolio investments in government securities, giving preference to long-term investors. The central bank has also increased the investment limits by foreign investors in government bonds by Rs 11,000 crore to Rs 2,42,000 crore while also tweaking rules to attract more long-term investments. As part of the additional limits, the RBI increased the limits for the “general” category by Rs 2,800 crore to Rs 1,88,000 crore, and the limits for the “long-term” category by Rs 8,200 crore to Rs 54,300 crore. The revisions will be effective from July 4, 2017.
As part of its occasional changes to investment rules, the RBI said 75 per cent of the future increases in limits for foreign investors will be allocated to the “long-term” category and 25 percent for “general.” Earlier 60 per cent was the limit for long-term investors.
Likewise, foreign portfolio investors (FPIs) will be allowed to raise their investment in state development loans (SDLs) by Rs 6,100 crore to Rs 33,100 crore for September quarter of the current fiscal. Hence, the overall limit of FPI investment in government securities goes up to Rs 2.75 lakh crore from Rs 2.58 lakh crore, RBI said.
Market regulator Securities and Exchange Board of India (Sebi) will issue the operational guidelines relating to allocation and monitoring of limits of the enhanced FPI investment in the central government securities and SDLs.
The Reserve Bank said it has also done away with the practice of transferring unutilised limits of long term category to general category of FPIs. The RBI said it has also done away with the practice of transferring unutilised limits of long term category to general category of FPIs. The revised limit comes into force as per RBI’s review of the medium term framework with relation to investment of FPIs in government securities.