INDIA: Allocation of India Foreign Investment Limits in Government Securities and Infrastructure Debt

Thursday June 28 2012

The Reserve Bank of India (RBI), vide its circular dated June 25, 2012 has decided to enhance the existing limit for India foreign  investment by SEBI registered Foreign Institutional Investors (FIIs) in Government debt by a further amount of USD 5 billion taking the overall limit for FII investment in Government debt from USD 15 billion to USD 20 billion. Accordingly, in partial amendment to para 1 of the SEBI circular CIR/IMD/FII&C/18/2010 dated November 26, 2010, the current limit of USD 5 billion for FII investment in Government securities with 5 year residual maturity shall be enhanced to USD 10 billion. Further, the residual maturity for the said USD 10 billion limit will stand reduced from aforesaid 5 years to 3 years.

Vide RBI circular dated June 25, 2012 it has been decided that the conditions for the limit of USD 22 billion for FII investment in corporate debt long term infra category, including the sub-limit of USD 5 billion with one year lock-in/residual maturity requirement and USD 10 billion for non- resident investment in IDFs (which are all within the overall limit of USD 25 billion for investment in infrastructure corporate bonds) have been changed as under:

• The lock-in period for investments under this limit has been uniformly reduced to one year; and
• The residual maturity of the instrument at the time of first purchase by an FII eligible IDF investor would be at least fifteen months.

It has been decided that additional limit for FIIs investments in Government debt long term category and corporate debt long term infra category (with one year lock-in and 15 months residual maturity), shall be allocated through special auction. The auction for this limit shall be done on the BSE from 15:30 hrs to 17:30 hrs, on Wednesday, July 04, 2012.

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