Mumbai: The Reserve Bank of India (RBI) has raised the foreign portfolio investment (FPI) limit in government securities by 4.7% to Rs2.42 billion for July-September quarter, mainly to increase foreign capital inflows. Earlier, the limit was Rs2.31 billion.
Likewise, the foreign portfolio investors (FPIs) will be allowed to raise their investment in state development loans (SDLs) by Rs61 billion to Rs331 billion for September quarter of the current fiscal.
Hence, the overall limit of FPI investment in government securities goes up to ₹ 2,751 billion from ₹ ,580 billion, RBI said on Monday.
The revised limits comes to effect from Tuesday. Market regulator Securities and Exchange Board of India (Sebi) will issue the operational guidelines relating to allocation and monitoring of limits of the enhanced FPI investment in the central government securities and SDLs.
Among others, RBI said future increases in the limit for FPI investment in government securities (g-secs) will be allocated in the ratio of 75% for long term category of FPIs and 25% for general category.
RBI said it has also done away with the practice of transferring unutilised limits of long term category to general category of FPIs. “To harmonise the approach to FPI investments in SDLs with that for central government securities, future increases in SDLs would be in the ratio of 75% for ‘long term’ category and 25% for ‘general’ category of FPIs."
The revised limit comes in to force as per RBI’s review of the medium term framework with relation to investment of FPIs in government securities. The medium term framework (MTF) for FPI investment in government securities (g-secs) and SDLs was introduced in October 2015.
Sovereign wealth funds, multilateral agencies, endowment funds, insurance funds, pension funds and foreign central banks are long term FPIs.