In order to increase foreign capital inflows in the country, the Reserve Bank of India (RBI) has increased the foreign portfolio investor (FPI) investment limit in Central Government Securities (G-secs) as well as in State Development Loans (SDLs) for the quarter July-September 2017, which will be effective from July 4, 2017.
According to the RBI’s notification, the limit for investment by FPIs in G-secs will move up to Rs 2,420 billion from earlier Rs 2,310 billion, while in SDLs, the limit will go up to Rs 331 billion from Rs 270 billion. Hence, the total limit for FPIs will increase to Rs 2,751 billion from Rs 2,580 billion. Besides, future increases in the limit for FPI investment in G-secs will be allocated in the ratio of 75% for long-term category of FPIs & 25% for general category. On the other hand, for SDLs, the allocation ratio will be the same like G-secs in order to keep harmonization between them. Market regulator Securities and Exchange Board of India (SEBI) will issue the operational guidelines relating to allocation and monitoring of limits of the enhanced FPI investment in the central government securities and SDLs.
As per the RBI notification, the central bank has done away with the practice of transferring unutilised limits of long-term category to general category of FPIs. The revised limit comes in to force as per RBI's review of the medium term framework with relation to investment of FPIs in government securities.