RBI hikes FPI investment limits in Government Securities

The Dollar Business Bureau

The Reserve Bank of India (RBI) on Tuesday increased the investment limits for foreign portfolio investors (FPIs) in central government securities (G-Secs) by Rs.64 billion and in State Development Loans (SDLs) by Rs.58 billion.

“The limits for investment by FPIs for the quarter January–March 2018 is increased by Rs.64 billion in Central Government Securities (Central G-Secs) and Rs.58 billion in State Development Loans (SDLs),” RBI said in an announcement (A.P. DIR Series Circular No. 14).

“The revised limits are allocated as per the modified framework prescribed in the RBI/2017-18/12 A.P. (Dir Series) Circular No.1 dated July 3, 2017,” it added.

The total limit of G-Secs will be Rs.2564 billion, of which Rs.1913 billion for general category FPIs and Rs.651 billion for long-term FPIs. Compared to existing limits, there will be an additional limit of Rs.16 billion for general-category FPIs and an additional Rs.48 billion for long-term FPIs.

From the existing Rs.393 billion, the limit in SDLs for FPIs will now be increased t0 Rs.451 billion. Of which, an additional limit of Rs.15 billion has been reserved for general FPIs whereas an additional limit of Rs.43 billion for long-term FPIs.

The revised limits for FPI investment in Government Securities will be effective from January 1, 2018.

“The operational guidelines relating to allocation and monitoring of limits will be issued by the Securities and Exchange Board of India (SEBI),” the RBI said.

FPIs have been optimistic on central G-Secs. They have almost exhausted the allowed investment limit of Rs.1897 billion for general category G-Secs.

However, SDLs have not attracted much interest from foreign investors. From the allotted quota of Rs.300 billion in the general category, FPIs have utilised only 17.11% while the permitted quota of Rs.93 billion in the long-term SDLs is still completely unutilised.