The Reserve Bank of India (RBI) on Tuesday increased the limit that foreign portfolio investment (FPI) can invest into government securities to 5% of the outstanding stock by March 2018, that will help in additional inflows of about Rs1.2 lakh crore. The central bank also added that the limits for FPI investment in debt securities will henceforth be announced/ fixed in rupee terms. As of now, the existing FPI investment limit in government securities is Rs1.53 lakh crore or $30 billion.
The RBI has also allowed FPI investment into state development loans (SDLs). “Additionally, there will be a separate limit for investment by FPIs in the State Development Loans (SDLs), to be increased in phases to reach 2 per cent of the outstanding stock by March 2018. This would amount to an additional limit of about Rs500 billion by March 2018,” the RBI release said.
The increase in limits will be announced every half year in March and September and released every quarter.
The RBI also permitted the issuance of Rupee bonds in offshore markets with a minimum maturity of 5 years.
“Based on the comments received on the draft framework and in consultation with the Government, it has been decided to permit Indian corporates to issue rupee denominated bonds with a minimum maturity of five years at overseas locations within the ceiling of foreign investment permitted in corporate debt (US$ 51 billion at present),” the release said.
There shall be no restriction on the end use of funds, except a small negative list and detailed instructions are being issued separately, RBI’s note added.