The Securities and Exchange Board of India on Wednesday allocated new limits for foreign institutional investors to invest in the debt market in line with a Budget announcement in this regard.
In Budget 2006-07, the government had increased the limit on FII investment in government securities from $1.75 billion to $2 billion and in corporate debt from $0.5 billion to $1.5 billion.
Under the revised limits, the $2 billion investment in government securities by FIIs will be divided in the proportion of $1.75 billion for 100 per cent debt FIIs and $250 million for 70:30 FIIs/subaccounts.
It may be mentioned that 100 per cent debt FIIs invest their entire portfolio in debt instruments while 70:30 FIIs invest in the debt and equity market in 70:30 ratio.
Similarly, the corporate debt limit of $1.50 billion will be shared as $1.35 billion for 100 per cent debt FIIs and $150 million for 70:30 FIIs. The regulator has also decided to allocate separate individual limits for investments to 100 per cent debt FII/sub accounts.
It has been clarified that FII investments will be restricted to listed debt securities of companies.
Moreover, FII subscription to commercial papers would be within the ceiling of $1.5 billion fixed for debt instruments other than government securities and treasury bills. The Sebi may withdraw unused allocation of one FII in case there is demand from any other FII for enabling optimal use.
There will be separate headrooms of $25 million and $15 million maintained for investments by general 70:30 FIIs\subaccounts in government securities and corporate debt, respectively. The FIIs are free to invest till the total investment limit reaches $225 million and $135 million in government securities and corporate debt respectively.
