BackIndia may denominate cap on foreign investment in debt in rupees
The current $30 bn cap was set when 'the rupee was much stronger, but at today's rupee level the FII effective limit is $24 bn,' finance secretary said
Premium
Mumbai/New Delhi: India may consider expressing the cap on foreign investment in government bonds in rupees rather than as currently in dollars, a step that would allow increased foreign buying of the debt.
“We are not opposed to setting the limit in rupee terms,"finance secretary Rajiv Mehrishi told reporters in New Delhi on Friday. The current $30 billion cap was set when “the rupee was much stronger, but at today’s rupee level the FII effective limit is $24 billion," Mehrishi said. He didn’t say when any change might occur.
Expressing the foreign institutional investor limit in rupees would raise the debt limit by about 25%, said Vijay Sharma, executive vice president for fixed income at PNB Gilts in New Delhi. The current debt limit was calculated at an exchange rate of about Rs50 to the dollar, he said. The rupee closed at 63.6425 to the dollar Friday.
“It would ease the pressure on bond yields," Sharma said.
The current $30 billion cap for foreigners in government debt stands almost exhausted at 98%, according to data compiled by National Securities Depository Ltd.
The yield on the government securities due in May 2025 ended little changed at 7.82% Friday, prices from the central bank’s trading system showed. Bloomberg
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!
