RBI denominates FPI debt investment in rupee1 min read . Updated: 06 Oct 2015, 07:52 PM IST
Overall, FPI can invest up to 5% of the total amount of outstanding government papers and 2% in state development loans
Mumbai: The Reserve Bank of India (RBI) on Tuesday formally announced denominating foreign investors’ limit in government debts in rupee terms and said such investments will be capped at a maximum of 20% of the outstanding of any individual security.
Overall, foreign portfolio investors (FPI) can invest up to 5% of the total amount of outstanding government papers and 2% in state development loans (SDLs), as announced in the monetary policy on 29 September.
This will open up additional investment of ₹ 1,20,000 crore in central government bonds and will allow ₹ 50,000 crore of fresh investments in state government loans.
Continuing with its investment norms, RBI said the bonds being invested should have a residual maturity of at least three years.
“Aggregate FPI investments in any central government security would be capped at 20% of the outstanding stock of the security," the notification said, adding the existing investments, if over the prescribed limits, will continue for now but not get replenished through fresh purchases by FPIs till these fall below 20%.
There will be no security-wise limit for SDLs for now.
The effective increase in limits for the following two quarters will be announced every half year in March and September.
Accordingly, the limit for all FPIs and long term investors in central government bonds will rise to ₹ 1.665 trillion by 12 October and ₹ 1.795 trillion by 1 January, from ₹ 1.535 trillion now.
Investments in state loans will rise to ₹ 3,500 crore and ₹ 7,000 crore respectively, from nil now.