ANNOUNCEMENT 01 Apr 2013In April 2013, the government of India announced altered domestic business conditions for foreign investors.
NUMBER OF INTERVENTIONS
Reserve Bank of India, Circular No.94: http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=7917&Mode=0
Circular No. 111
29 January 2014
23 July 2014
On 1 April 2013, the Reserve Bank of India (RBI) simplified the rules for foreign holding of Indian debt. Debt categories have been reduced to two main groups: Government debt and corporate debt. The respective limits for foreign holding of debt in these categories remain unchanged (US$25 billion and US$ 51 billion respectively). However, some restrictions are lifted:
- The limit on government debt applies to both long- and short- term bonds irrespective of the amount invested in each sub-category. Previously, no more than US$ 10 billion could be invested in T-bills (short-term government debt).
- The limit on corporate debt applies to non-infrastructure and infrastructure sectors irrespective of the amount invested in each sub-category. Previously, no more than US$ 25 billion could be invested in each of the two.
On 12 June 2013, the RBI enhanced the limit for foreign investment in Government debt by US$ 5 billion to US$ 30 billion.
Out of the US$ 30 billion, a sub-limit for investment in government dated securities of US$ 5 billion is available for Securities and Exchanges Board of India (SEBI) registered long term investors - Sovereign Wealth Funds, Multilateral agencies, Pension/Insurance/Endowment funds, and Foreign Central Banks and the rest is available for QFIs, FIIs and FPIs. On 29 January 2014, the RBI increased this sub-limit to US$ 10 billion within the total limit of US$ 30 billion.
On 23 July 2014, the above increase in the sub-limit was taken back, after which the limit for long term investors in government dated securities was reduced to US$ 5 billion and the limit for other foreign investors including FIIs, QFIs, and FPIs in government securities was increased from US$ 20 billion to US$25 billion. However, the notification requires investments in the incremental US$ 5 billion to be solely in government bonds with a minimum residual maturity of three years.
FIIs - Foreign Institutional Investors
QFIs - Qualified Foreign Investors
FPIs - Foreign Portfolio Investors