New Delhi: To attract more investments into India to finance the rising current account deficit, finance minister P. Chidambaram on Saturday announced a major rationalization in foreign investment limits in the government securities and corporate bond market.
The finance minister announced a merging of all the existing sub-limits under two broad categories from 1 April.
The first category will pool together old and long-term government securities into one overall government securities bucket with an overall cap of $25 billion.
The second category will pool together all corporate bonds with an overall limit of $51 billion. This will include $1 billion for qualified financial investors, $25 billion for foreign institutional investors (FIIs) in corporate bonds and $25 billion FII in long-term infrastructure bonds.
The current auction mechanism used by capital markets regulator Securities and Exchange Board of India for allocating debt limits will be replaced by a on tap mechanism currently in place for infrastructure problems, Chidambaram said while addressing the National Editors Conference in New Delhi.
In order to allow large investors to plan their investments in advance, Chidambaram said the government will review the foreign investment limit in corporate bonds when 80% is utilized.
For government bonds, the limit will be enhanced based on utilization, demand from foreign investors and macro economicrequirements, he said.
However, the annual enhancement will be within 5% of the annual gross borrowing limit of the Union government excluding buybacks, he added.