New Delhi: In a effort to increase overseas capital inflows to strengthen the rupee, the government on Wednesday enhanced the limit for foreign investments in government securities by USD 5 billion with immediate effect.
With the enhancement, the total limit of investments by foreign entities in government securities (G-Secs) has increased from USD 25 billion to USD 30 billion. In a late evening circular, capital market regulator Sebi said the government has increased the limit by USD 5 billion (equivalent to about Rs 29,137 crore).
"It has been decided that the aforesaid enhanced limit of USD 5 billion shall be available for investments only to those FIIs which are registered with Sebi under the categories of Sovereign Wealth Funds (SWFs), Multilateral Agencies, Endowment Funds, Insurance Funds, Pension Funds and Foreign Central Banks," the circular said.
According to Sebi, the amount of USD 5 billion together with the unutilized limit of Rs 29,812 crore (USD 6.2 billion) as on May 31, 2013 (due for auction on June 20, 2013) will be made immediately available for "investment on tap".
Further, the amount which is not utilized as on June 18 -- out of the presently unutilized limit of Rs 29,812 crore -- would be auctioned on June 20. Similar exercise would continue on a monthly basis, it added.
In a separate circular, RBI said: "On a review, it has now been decided in consultation with Government of India to enhance the limit for foreign investment in Government dated securities with USD 5 billion to USD 30 billion with immediate effect."
With regard to those FIIs that have exhausted their reinvestment limits, a special window of up to USD 250 million would be allowed for each FII to invest till the next auction of government securities. The next auction is scheduled for June 20.
This would be a "one time measure", subject to the aggregate investments in government debt by all FIIs/QFIs is limited to USD 25 Billion, the circular said. The cap of USD 25 billion is other than the limit of USD 5 billion marked for entities like sovereign wealth funds and multilateral agencies.
"Such investments made by FIIs using the special window shall be subject to a lock in period of 90 days. Moreover, these investments will not be eligible for re-investment facility," the circular said.
Bouncing back from its record lows, the rupee on Wednesday gained 60 paise to close at 57.79 against the dollar as rating agency Fitch revised India's credit outlook to stable and government officials soothed market sentiment with assurance of taking steps to curb the currency's fall. In the last five trading sessions, it had tanked by 195 paise, or 3.45 percent against the dollar.


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