FII limit raised by $5 bn in govt bonds

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 $5 billion with immediate effect.

With the enhancement, the total limit of investments by foreign entities in government securities (G-Secs) has increased from $25 billion to $30 billion.

In a late evening circular, capital market regulator Sebi said the government has increased the limit by $5 billion (equivalent to about Rs 29,137 crore).

"It has been decided that the aforesaid enhanced limit of $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 $5 billion together with the unutilised limit of Rs 29,812 crore ($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 utilised as on June 18 - out of the presently unutilised 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 $5 billion to $30 billion with immediate effect."

With regard to those FIIs that have exhausted their reinvestment limits, a special window of up to $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.