Sebi said in a statement that the existing FII investment limit of $2 billion in government securities or treasury bills has been enhanced to $2.6 billion. However, the FII investment limit in corporate debt remains unchanged at $1.5 billion. The total permissible limit for FIIs in government securities and corporate debt has gone up from $3.5 billion to $4.1 billion.
Earlier, on April 5, 2006, the regulator had increased the cumulative debt investment limit for FII/sub account from $1.75 billion to $2 billion in the government securities. Similarly, the FII limit in the corporate debt has been hiked from $0.5 billion to $1.5 billion.
According to a senior banker, this decision of the regulator will witness a fresh fund flow from FIIs in the government securities or treasury bills which will lead to a dip in the yields resulting an upward price movement. The short and mid-term investment will fetch better returns.
More Head Room
Debt investments will be applicable only to those FIIs that invest 100% of their corpus in debt papers