Reserve Bank has raised the FPI investment limit in government securities by 4.7 per cent to Rs 2.42 lakh crore (Rs 2.42 billion) for July-September quarter, mainly to increase foreign capital inflows. Earlier, the limit was Rs 2.31 lakh crore (Rs 2.31 billion). Likewise, the foreign portfolio investors (FPIs) will be allowed to raise their investment in state development loans (SDLs) by Rs 6,100 crore (Rs 61 billion) to Rs 33,100 crore (Rs 331 billion) for September quarter of the current fiscal. Hence, the overall limit of FPI investment in government securities goes up to Rs 2.75 lakh crore ( Rs 2,751 billion) from Rs 2.58 lakh crore (Rs 2,580 billion), Reserve Bank of India said today. The revised limits comes to effect from tomorrow.
Market regulator Securities and Exchange Board of India (Sebi) will issue the operational guidelines relating to allocation and monitoring of limits of the enhanced FPI investment in the central government securities and SDLs. Among others, Reserve Bank said future increases in the limit for FPI investment in g-secs will be allocated in the ratio of 75 per cent for long term category of FPIs and 25 per cent for general category. RBI said it has also done away with the practice of transferring unutilised limits of long term category to general category of FPIs.
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“To harmonise the approach to FPI investments in SDLs with that for central government securities, future increases in SDLs would be in the ratio of 75 per cent for ‘Long Term’ category and 25 per cent for ‘General’ category of FPIs.” The revised limit comes in to force as per RBI’s review of the medium term framework with relation to investment of FPIs in government securities. The medium term framework (MTF) for FPI investment in government securities (G-secs) and SDLs was introduced in October 2015. Sovereign Wealth Funds, Multilateral Agencies, Endowment Funds, Insurance Funds, Pension Funds and Foreign Central Banks are long term FPIs.