Sunday, 15 April 2012

FII Investment in Bonds

The government reviewed FII Investment limits in November 2011 in the context of India’s evolving macroeconomic situation and the need for enhancing capital flows and making available additional financial resources for the corporate sector:

1. FII investment limit in government securities (treasury bills and dated securities) was raised by US$5billion, raising the cap to US $ 15 billion.
2. FII investment limit in corporate bonds was raised by US$ 5billion, raising the cap to US$20 billion.

 The investment limit in long-term infrastructure corporate bonds, however, has been kept unchanged at US$ 25 billion. With this, overall limit for FII investment in corporate bonds and government securities now stands at US$ 60 billion. 1

Last time, this limit was reviewed in 2010. In September 2010 and since then, about 94% of the limit for government securities and about 91% for FII investments in corporate bonds have been used up. So, both these limits are close to exhausted. Hence, the finance ministry raised these limits after a review.  This move will help the Centre raise funds through market borrowing programme without hurting availability of money for the private sector. 2

1. Economic Survey 2012, pg.125

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