Govt may relax rules to attract FII money into infra bonds
According to official sources, the finance ministry is planning to reduce the lock-in period of 3 years to “even below 2 years” so that the bonds generate enough interest amongst FIIs.
In the Budget 2011-12, Finance Minister Pranab Mukherjee announced that the limit for FII investment in corporate bonds, with residual maturity of over five years will be increased to $25 billion, thereby raising the total limit for FII investment in corporate bonds to $ 40 billion.
FIIs were allowed to invest in unlisted bonds with a minimum lock-in period of three years, during which they can trade amongst themselves.
Of the $25 billion limit, however, FIIs have invested only $80 million till June 30, as per the data available with the government.
With the proposed relaxation, the sources added that the infra structure bonds would become more attractive for the FIIs.
According to analysts, the relaxation may see more participation by FIIs in the infrastructure bond market.
“In 3 years, the FIIs feel that their money is getting blocked. And since there is no vibrant bond market in India, they find it difficult to exit. This will be an opportunity for them to invest without their money getting blocked for long,” said Jagannadham Thunuguntla, strategist and head of research at SMC Global. India is in dire need of infrastructure and is looking
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