RBI eases FPI investment norms in Govt debt

Easing norms for foreign ownership of government debt, RBI on Tuesday announced higher investment limits in rupee terms in government securities by FPIs with a view to bringing in an additional Rs 1.2 lakh crore by March 2018.

The announcement follows a decision by RBI to fix FPI investment limits in rupee terms and raise it in phases to reach 5 <g data-gr-id="24">per cent</g> of the outstanding stock by March 2018.

"The limits for FPI (foreign portfolio investors) investment in debt securities will henceforth be announced/ fixed in rupee terms," RBI said in a notification.

In aggregate terms, RBI said: "This is expected to open up room for an additional investment of Rs 1.2 lakh crore billion in the limit for central government securities by March 2018 over and above the existing limit of Rs 1.5 lakh crore for all government securities." For the current fiscal, RBI said it has been decided to enhance the limit for investment by FPIs in G-secs in two tranches from October 12, <g data-gr-id="33">2015</g> and January 1, 2016. The limit will be increased from Rs 1.53 lakh crore to Rs 1.7 lakh crore from October 12 and Rs 1.86 lakh crore from January 1. Additionally, RBI said there will be a separate limit for investment by all FPIs in the state development loans (SDLs), to be raised in phases to reach 2 <g data-gr-id="28">per cent</g> of the outstanding stock by March 2018.

This will amount to an additional limit of about Rs 50,000 crore by March 2018. The limits for investment by FPIs in G-secs were last raised to $30 billion in June 2013.

The changes are in line with the Medium Term Framework (MTF) for FPI limits in G-secs "to provide a more predictable regime". The MTF was announced by RBI in the fourth bi-monthly monetary policy for the fiscal on September 29.

RBI said the effective increase in limits for the following <g data-gr-id="26">two quarters</g> will be announced every half year in March and September. "Aggregate FPI investments in any central government security will be capped at 20 <g data-gr-id="27">per cent</g> of the outstanding stock of the security.