Change in Government Debt Investment Limits
Summary
The circular modifies existing investment limits for Foreign Portfolio Investors in Government securities by reallocating funds from Long Term FPIs to all FPIs. The overall limit remains USD 30 billion, with the general limit increased to USD 25 billion and the Long Term FPI limit reduced to USD 5 billion. New investments under the incremental limit must have a minimum residual maturity of three years, though no lock-in period applies.
Text
Present debt investment limits available for FPI investments in Government securities (G-Secs) include a USD 20 billion limit for all FPIs and another USD 10 billion limit for Long Term FPIs.
It has been decided to enhance the investment limit in government securities available to all FPIs by USD 5 billion by correspondingly reducing the amount available to long term FPIs from USD 10 billion to USD 5 billion within the overall limit of USD 30 billion.
The incremental investment limit of USD 5 billion shall be required to be invested in government bonds with a minimum residual maturity of three years.
All future investment against the limit vacated when the current investment by an FPI runs off either through sale or redemption shall also be required to be made in government bonds with a minimum residual maturity of three years.
There will be no lock-in period and FPIs shall be free to sell the securities to the domestic investors.
The Government debt investment limit shall now be as follows: Type of limit: Government Debt; Cap: US$ 25 bn / INR 124,432 Crore; Eligible Investors: FPIs.
Those FPIs which had acquired debt limits in the auction held on July 22, 2014 may utilise the limit in terms of the SEBI circular CIR/IMD/FIIC/8/2014 dated April 07, 2014 i.e. the debt limits purchased in the said auction are grandfathered.
This circular shall come into effect immediately. This circular is issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992.
Source: SecMarx — Change in Government Debt Investment Limits. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.