FII investments in Debt Securities
Summary
SEBI enhances the cumulative debt investment limit for Foreign Institutional Investors and Sub Accounts from US $2.6 billion to US $3.2 billion. Investments by FIIs in debt-oriented mutual fund units are now classified as corporate debt and counted towards the US $1.5 billion corporate debt limit. The circular mandates immediate cessation of new corporate debt investments until holdings fall within the stipulated limit.
Text
It has now been decided to further enhance the said limit to US $3.2 billion.
investments by FIIs/ Sub Accounts in debt oriented mutual fund units (including units of money market and liquid funds) shall henceforth be considered as corporate debt investments and reckoned within the stipulated limit of US $1.5 billion, earmarked for FII/ Sub Account investments in corporate debt.
Henceforth, there shall be no demarcation between 100% debt and normal 70:30 FIIs/ Sub Accounts for the purposes of allocation of debt investment limits. The individual limits allocated to the 100% debt FIIs/ Sub Accounts stand cancelled.
The allocation of unutilized/ unallocated limits for investments in Government Securities/ T-Bills shall be on first-come-first-serve basis. The applications may be forwarded on the e-mail ID, fii_debtrequests@sebi.gov.in. The allocation shall be valid for a period of 15 days from the date of the allocation letter, on the expiry of which the unutilized limits shall lapse.
there shall be no further investment, or rollover, of existing position in corporate debt, by both 100% debt and normal 70:30 FIIs, till the holdings fall within the stipulated limit of US $1.5 billion.
All FII transactions in debt-oriented mutual fund units which were previously reported as Equity transactions should be reported as debt on February 15, 2008, through the existing reporting system.
Importantly, all such transactions should be nullified simultaneously by reporting reverse transactions in equity on the aforementioned date.
Source: SecMarx — FII investments in Debt Securities. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.