April 07, 2018

Bond investment limit increased for FPI’s by RBI

Reserve Bank of India

On April 7, the Reserve Bank upped debt investment limits for Foreign Portfolio Investors (FPIs) across all segments, which will collectively result in a rise of over Rs 1 trillion in fiscal year 2018-19.

As per the notification of the central bank, the total debt limit will rise to Rs 5,94,600 crore by September 2018 and go up further to Rs 6,49,900 crore by end of the fiscal year with the present limit being Rs 5,45,823 crore.

“The limit for Foreign Portfolio Investor (FPI) in central government securities would be increased by 0.5% each year…,” RBI said.

The limits on FPI investment in State Development Loans (SDLs) would remain unchanged at 2 percent of outstanding stock of securities, it said.

On corporate bonds, the FPI investment will be fixed at 9 percent of outstanding stock of corporate bonds and all the sub categories within the segment will be discontinued.

In the government securities general category, the limit has been revised up to Rs 2,07,300 crore by September 2018 and Rs 2,23,300 crore by March 2019 from the present Rs 1,91,300 crore, it quantified. For the long term G-secs, the limits will go up to Rs 92,300 crore by end of the fiscal from the present Rs 65,100 crore, with a mid-fiscal cap of Rs 78,700 crore.

In the SDL-general category, the limit will go up from Rs 31,500 crore to Rs 34,800 crore in September 2018 and further to Rs 38,100 crore by end of the fiscal, it said.

For the long-term SDL bonds, the present limit of Rs 13,100 crore will come down to Rs 7,100 crore by September and will stay at the same level by March end as well, it said, attributing the reduction to the transfer of Rs 6,500 crore of limit transfer to G-secs.

In corporate bonds, the limits have been revised up to Rs 2,89,100 crore in March 2019, from Rs 2,44,323 crore presently with a milestone of Rs 2,66,700 crore midway through the fiscal year.

The allocation of increase in G-sec limit over the two sub-categories – general and long-term – remains at the current ratio of 25:75. However, based on an assessment of investment interest, this ratio has been re-set at 50:50 for the year 2018-19, it said.

There will be a separate notification will be issued announcing coupon reinvestment arrangements in consultation with SEBI, it said.

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