FII investment in debt securities

IMD DEPARTMENT

Sub: FII investment in debt securities

SEBI (Foreign Institutional Investors) Regulations, 1995 permits FII investment in debt securities, including Government securities, treasury bills and corporate debt securities, through 100% debt route as well as through the equity route where upto 30 % investments can be made in debt securities.

Government has now clarified that the FII limit allocated every year under their relevant guidelines is a cumulative limit and since limit has not been finalized for 2003-04, the existing cap of US$ 1 billion for investment by 100% debt FIIs in debt securities and investment under the 70:30 route in dated Government securities and treasury bills for the year 2002-03 will continue.

In view of the above, the following shall be applicable with immediate effect:

1. Investment under the 70:30 route in dated Government securities and treasury bills is capped at US$ 100 million. Further investment shall be subject to availability of head room under this route.

 

2. Individual limits earlier allocated for 100% debt funds stand non-operative and will be realigned based on the capped limit of US$ 900 million for 100% debt funds. The revised limits will be advised to the 100% debt funds separately.

 

3. Unutilised limit, if any, shall not be available for investment until fresh limits are allocated.

 

4. Further investment / rollover of existing positions shall be permissible subject to availability of limits under the realigned limits.

 

A copy of the circular is available at the web page "Foreign Institutional Investors" on our website www.sebi.gov.in . The custodians are requested to bring the contents of this circular to the notice of their FII clients.

Yours faithfully,

 D.Chanda

 Chief General Manager