New Delhi: The Finance Ministry has created two new sub-limits to enable foreign institutional investors (FIIs) park their funds in short-term papers of Government securities (G-secs) and corporate bonds.
In the G-sec bucket, where the overall FII investment limit is now pegged at $25 billion, the Finance Ministry has now carved out a sub-limit of $5.5 billion for foreign investment in short-term papers such as treasury bills.
Similarly, in the case of corporate bonds, a new sub-limit of $3.5 billion has been created for foreign investment in short-term papers such as commercial papers. This sub-limit has been carved out of the overall $51 billion limit for corporate bonds.
These sub-limits have been carved out based on the current holdings of such short-term instruments by FIIs and have been provided so that existing investments are not adversely affected.
The two sub-limits form part of the new investment policy for foreign investment in G-secs and corporate bonds.
Finance Minister P. Chidambaram announced the new policy on March 23 at the National Editors’ conference in the capital.
To encourage greater foreign investments in rupee-denominated debt instruments, the Government has simplified the framework of FII debt limits and also drawn a perspective plan for enhancement of these debt limits in the future. All the existing debt-limits have been merged into the two broad categories. The new approach has come into effect from April 1.
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