The Reserve Bank of India (RBI) on Thursday notified a separate limit of Rs 5,000 crore for long positions in Interest Rate Futures (IRFs) for foreign portfolio investors (FPIs). The central bank stated that currently, the FPI limit for government securities (G-secs) is fungible between investments in G-secs and investments in IRF. Also, FPI long positions in IRF are not allowed on G-sec limit utilisation reaching 90%. “To facilitate further market development and to ensure that access of FPIs to IRFs remains uninterrupted, it has been decided to allocate FPIs a separate limit of Rs 5,000 crore for long position in IRFs,” the RBI said in a statement.
The conditions state that the aggregate long position of all FPIs, each of whom has a net long position in any IRF instrument, should not exceed Rs 5,000 crore, aggregated across all IRF instruments. It also states that the total gross short (sold) position of any FPI should not exceed its consolidated long position in G-secs and IRFs, at any point in time. The limits prescribed for investment by FPIs in G-secs (which is currently R3.01 lakh crore) will be exclusively available for investment in G-secs, RBI said.