Mumbai: The government on Thursday increased the investment limit of foreign institutional investors (FII) in government and corporate bonds by $5 billion each to bring more dollars in the country.
Rupee recovered sharply after the announcement to trade at 53.65 a dollar against 53.89 a dollar earlier in the day.
Following this, the investment limit of FIIs in government bonds stands at $25 billion and in corporate bonds at $50 billion.
In corporate bonds, half of the investment limit is reserved for bonds issued by infrastructure companies.
In government securities, FIIs can invest as much as $10 billion in any paper. For the remaining limit, the government expanded the scope of investors and said $15 billion of bonds can be invested by FIIs, sovereign wealth funds, multilateral agencies, foreign central banks and pension, insurance and endowment funds.
Foreign investors, however, will have to invest in dated securities and cannot put their money in short-term papers such as treasury bills, the Reserve Bank of India (RBI) said in a notification on its website.
As long as the papers are dated securities, there is no cap on the residual maturity. The Reserve Bank had earlier instructed the FIIs to invest in securities that mature in three years.
In some categories, RBI also lifted the lock-in period clause wherein a foreign investor could not sell its investment within one year of investment.
Over and above this limit, qualified foreign investors are eligible to invest in corporate debt securities without any lock-in or residual maturity clause, and in mutual fund debt schemes subject to an overall ceiling of $1 billion.