Policy Relating to FII Investments in Government Securities and Long-Term Infrastructure Bonds Rationalized

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The Government has rationalized the policies relating to FII Investments in Government Securities, Corporate Bonds, Long-Term Infra Bonds and ECB of Indian Companies and QFI. The following changes have been made therein:

  • Government Securities: The residual maturity period of five years on the FIIs investment in Government Securities has been reduced to three years. An additional window of US$5 billion would be available for FII investment in Government Securities subject to residual maturity of three years. The above modifications would now make available to FIIs a total limit of US$10 billion subject to residual maturity of three years. Thus, total FII limit would stand at US$20 billion. It has also been decided to allow long term investors like Sovereign Wealth Funds (SWFs), Multilateral Agencies, Endowment Funds, insurance funds, pension funds and foreign Central Banks to be registered with SEBI to also invest in Government securities within this enhanced limit of USD 20 billion.
  • A new scheme under ECB: HLC-ECB has decided to add a new scheme for External Commercial Borrowings (ECB borrowings). Indian companies can now avail of ECBs for repayment of Rupee loan(s) availed of from the domestic banking system and/or for fresh Rupee capital expenditure, under the approval route, subject to the conditions prescribed therein.
  • Rationalization in the Scheme of FIIs investment in Long-term Infrastructure Bonds: The scheme of FII investments in long term infra-bonds has been modified. Of the US$7 billion available in FII investments would now have one year lock-in and at least 15 months residual maturity at the time of first purchase by an FII. The residual maturity of the bonds under the US$5 billion ceiling would now be at least 15 months at the time of first purchase and the lock-in period would continue to be one year.  The lock-in for IDF investment would be reduced to one year from the present three years subject to the condition that the residual maturity at the time of first purchase is at least 15 months. QFIs can invest in those MF debt schemes that hold at least 25% of their assets (either in debt   or equity or in both) in the infrastructure sector.

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