The Reserve Bank of India (RBI) has doubled the sub-limit for investment in government securities, or G-Secs, to $10 billion by long-term investors like sovereign wealth funds and foreign central banks, with a view to attract more funds.
“It has now been decided, in consultation with government to enhance, with immediate effect, the existing sub-limit of $5 billion available to long-term investors registered with SEBI (Securities and Exchange Board of India) – SWFs, multilateral agencies, pension and foreign central banks for investment in government securities to $10 billion…,” RBI said in a notification on Wednesday.
However, the total limit of $30 billion available for foreign investments in government securities has not been tinkered with.
Foreign institutional investors – qualified foreign investors (QFIs) and long-term investors – registered with market watchdog Sebi are allowed to purchase government securities and non-convertible debentures (NCDs) or bonds issued by Indian companies within the limit of $30 billion.
The operational guidelines in this regard will be issued by Sebi, the apex bank said.
Meanwhile, Sebi said in a circular, “Government of India has now decided to enhance this sub-limit from $5 billion to $10 billion within the overall government debt limit of $30 billion.”
The relaxation in the investment limit would be applicable for FIIs which are registered with Sebi under the categories of sovereign wealth funds (SWFs), multilateral agencies, endowment funds, insurance funds, pension funds and foreign central banks, it added.
These foreign entities are generally considered as long term investors.
Sebi has been making various efforts to attract foreign funds into the market and had recently notified foreign portfolio investor (FPI) regulations.
FPIs bring together all the three investment categories – FIIs, their sub-accounts and QFIs.
Under the new norms, FPIs have been divided into three categories as per their risk profile and the know-your-client (KYC) requirements and other registration procedures would be much simpler for FPIs compared to current practices.
Besides, the new class would be given a permanent registration, as against the current practice of granting approvals for one year or five years to the overseas entities seeking to invest in Indian markets.