INDIA: Proposals to remove cap on India foreign investment in rupee debt

Friday September 27 2013

A research paper published by an internal department of the Securities and Exchange Board of India (SEBI) has proposed that the government should remove caps on Indian foreign investment in rupee-denominated debt,

The SEBI report states that the rationale behind limiting foreign ownerships of Indian debt was not in line with India`s current economic policy goals.

Under current rules, foreign investments in debt is limited to $81 billion for both corporate and government debt, apart from several other restrictions based on investor profile, tenure and issuer category.

The SEBI proposals are as follows:

• Removal of all existing quantitative restrictions on foreign investment in Government bond market
• If at some stage, restrictions need to be imposed, the existing quantitative restrictions could be replaced by percentage limits on foreign ownership
• No distinction on asset class (government bonds and treasury bills)
• No distinction on investor classes (FII, QFI, Sovereign Wealth Funds etc)
• KYC regime should be simplied
• Strengthen the liquidity and market efficiency of futures and options on currency underlyings in India by giving access to foreign investors

Click on the above link for the SEBI report.