Debt Allocation Mechanism for FII/QFI - Government debt securities
Summary
SEBI extends the existing debt allocation mechanism for corporate debt to FII and QFI investments in Government debt securities. FIIs and QFIs are permitted to invest in Government Debt without purchasing specific limits until overall investment reaches 90%, after which an auction mechanism applies. Previous restrictions on re-investment for Government Debt limits are removed, though previously allocated limits retain their original utilization timelines.
Text
It has been decided to extend the allocation mechanism, as presently applicable for corporate debt securities, to FII/QFI investment in Government debt securities also.
FIIs/QFIs can now invest in Government Debt without purchasing debt limits till the overall investment reaches 90% after which the auction mechanism shall be initiated for allocation of the remaining limits, as currently in place for FII investments in Corporate Debt.
the facility of re-investment provided vide SEBI circular CIR/IMD/FIIC/18/2010 dated November 26, 2010 as well as the restrictions on re-investment as given in the SEBI circulars CIR/IMD/FIIC/1/2012 dated January 03, 2012, CIR/IMD/FIIC/22/2012 dated November 07, 2012 and CIR/IMD/FIIC/1/2013 dated January 01, 2013 shall no longer apply in respect of limits held/investments made by FIIs in the Government Debt category, till the limits are available on tap.
for those FIIs which had obtained Government Debt limits in the debt limit auctions held on August 20, 2013, the time period for utilization of limits allocated through the bidding process shall be in terms of the SEBI circular CIR/IMD/FIIC/11/2013 dated July 31, 2013.
Source: SecMarx — Debt Allocation Mechanism for FII/QFI - Government debt securities. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.