By a circular dated October 6, 2015, the Reserve Bank of India
("RBI") has increased the maximum limit
for investments by Foreign Portfolio Investors
("FPI") in Government securities
Consequently, the Securities and Exchange Board of India
("SEBI") also issued a circular on the
same day, along the same lines, to increase the limit for
investments by FPIs in Government securities ("SEBI
Circular"). This is pursuant to the fourth bi-monthly
Monetary Policy Statement for the year 2015-16, issued by the RBI
on September 29, 2015, wherein the FPI limits in Government
securities was announced in terms of the Medium Term Framework
("MTF"). The RBI Circular and the SEBI
Circular were issued pursuant to the changes brought about by the
MTF, the details of which are summarised below:
1. Going forward, the limits for FPI investments in debt
securities will be announced/fixed in Rupee terms.
2. The limit for all FPI investments in Central Government
Securities ("CGS") will be increased in
phases to reach 5% (five percent) of the outstanding stock by
3. A separate limit for investments by all FPIs in State
Development Loans ("SLDs") will be
increased in phases to reach 2% (two percent) of the outstanding
stock by March, 2018.
4. The effective increase in limits for the following two
quarters will be announced every half year in March and September.
Accordingly, for the current financial year, the limit for
investment by FPIs in Government securities will be enhanced in two
tranches from October 12, 2015 and January 1, 2016.
5. The aggregate FPI investment in any CGS will be capped at 20%
(twenty percent) of the
amountoutstandingundereachCGS. Investments made in securities
which are over this limit will be permitted to continue, however
fresh purchases by FPIs in these securities will not be permitted,
till the corresponding security-wise investments fall below 20%
6. The security wise limit for FPI investments will be monitored
on a day-end basis and CGS in which the aggregate investments are
above the prescribed limit of 20% (twenty percent), will be put on
a negative list, consequent to which no fresh FPI investments will
be permitted in such securities until they are removed from the
negative list. SDLs will have no such security-wise limit.
7. Allotherexistingconditions,including investment of coupons
being permitted outside the limits and investments being restricted
to securities with a minimum residual maturity of 3 (three) years,
will continue to be applicable to all categories of FPIs .
8. The daily reporting of the negative list, coupon investment
data, daily debt utilisation data as well as the aggregate
security-wise holdings by FPIs will be made available on the
National Securities Depository Limited and Central Depository
Services Limited websites.
The increase in the limit for FPI seeks to attract further
foreign investments, to enhance the national exchequer. As
described by the RBI Circular, in aggregate terms, the increase in
the FPI investment limits in CGS will open up room for an
additional investment of ` 1200,000,000,000 (Indian Rupees Twelve
hundred billion) by March, 2018, which will be over and above the
current limit of ` 1535,000,000,000 (Indian Rupees One thousand
five hundred thirty five billion).
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).