FII sub-limit hike in govt bonds credit-positive, says Moody's

Ratings agency Moody's Investors Service has said the government's measures to raise the investment limit for foreign institutional investors (FIIs) in government bonds is a positive for the country's credit profile since it will help stabilise domestic interest and currency rates.

The Reserve Bank of India last week increased the limit available for foreign institutional investors by $5 billion to $25 billion but kept the overall limit intact by lowering the limits for long-term foreign investors such as sovereign wealth funds.

"Raising the limit for foreign institutional investors is credit positive for the Government of India because it will increase foreign investment in government securities over the next several months," Moody's said.

The agency added the revised investment limit was also small enough to limit impact on India from changes in overseas demand for debt, according to a weekly report.

Moody's rates India with a 'Baa3' rating, the lowest investment-grade rating, and a 'stable' outlook.

(Reuters)