Investments by FPIs in Government securities
Summary
The circular announces an enhancement of the Medium Term Framework for Foreign Portfolio Investor (FPI) limits in Indian Government securities, effective October 12, 2015, and January 1, 2016. It introduces a new security-wise limit of 20% for Central Government securities and mandates a minimum residual maturity of three years for Long Term FPI investments. The document also details the availability of additional limits for State Development Loans and coupon reinvestment outside the main caps.
Text
It has been decided that the limits for FPI investment in debt securities shall henceforth be announced/fixed in rupee terms.
Limit for FPIs in Central Government securities would be increased to INR 129,900 cr and INR 135,400 cr on October 12, 2015 and January 01, 2016 respectively from the existing limit of INR 124,432 cr.
Limit for Long Term FPIs (Sovereign Wealth Funds (SWFs), Multilateral Agencies, Endowment Funds, Insurance Funds, Pension Funds and Foreign Central Banks) in Central Government securities would be increased to INR 36,600 cr and INR 44,100 cr on October 12, 2015 and January 01, 2016 respectively from the existing limit of INR 29,137 cr.
There will be a separate additional limit for investment by all FPIs in State Development Loans (SDL). Debt limits of INR 3,500 cr each would be released on October 12, 2015 and January 01, 2016 respectively under this category.
With regard to FPI investments in Central Government securities, it has also been decided to prospectively put in place a security-wise limit of 20% of the amount outstanding under each Central Government security.
However, fresh purchases by FPIs in these securities shall not be permitted till the corresponding security-wise investments fall below 20%.
The Central Government securities in which the aggregate FPI investment is more than 20% of the outstanding would be placed in a negative investment category in which fresh investments would not be permitted.
This negative investment list as well as the aggregate security-wise holdings by FPIs at the end of every day will be made available by the depositories (NSDL and CDSL) on their websites.
all future investments by Long Term FPIs... shall be required to be made in Central Government securities having a minimum residual maturity of 3 years.
The stipulation on minimum residual maturity of three years shall also apply to SDLs.
The free limit as on October 09, 2015 within the INR 124,432 cr limit along with the new debt limits of INR 5,468 cr shall be auctioned on the exchange platform on October 12, 2015.
The incremental limit of INR 7,463 cr for Long Term FPIs shall be available for investment on tap with effect from October 12, 2015.
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Source: SecMarx — Investments by FPIs in Government securities. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.