May 2, 2018

The Reserve Bank of India on Tuesday permitted foreign portfolio investors or FPIs to invest in treasury bills issued by the Central government.However, the investors will have to ensure that their exposure in government securities as well as corporate bonds of less than one year maturity shall not exceed 20 per cent of total investment.

In case the investments in securities go beyond the fixed limit, then the FPIs will have to bring it down to 20 per cent within a period of six months, the RBI said in a notification issued on Tuesday.

The central bank further said that the FPI shall ensure that no further additions are made to the portfolio of securities either through fresh purchases or through roll-down of investments until the share of such portfolio of securities falls below 20 per cent of the total investment.

The implementation date of online monitoring of utilisation of G-sec limits has been set as June 1, 2018.

Earlier, the foreign investors were permitted to invest in corporate bonds with minimum residual maturity of above one year but no cap on investment in securities with residual maturity below one year was stipulated for FPI investments in such bonds.

"While the FPIs are only permitted to invest in corporate bonds with minimum residual maturity of above one year, in order to bring consistency across debt categories, it is stipulated that investments by an FPI in corporate bonds with residual maturity below one year shall not exceed, at any point in time, 20 per cent of the total investment of that FPI in corporate bonds," the RBI notification said.

At any point in time, all securities with residual maturity of less than one year will be reckoned for the 20 per cent limit, regardless of the maturity of the security at the time of purchase by the FPIs, said the notification.

The directions will be applicable with immediate effect.

[Business Today]