The Finance Ministry on Thursday increased the investment limit for foreign institutional investors in government securities and corporate bonds by $5 billion each, a move that will enhance capital flows and increase the availability of resources for Indian corporates.
The FIIs can now invest up to $15 billion in government securities and $20 billion in corporate bonds, official sources said.
The investment limit in long-term infrastructure bonds, however, has been kept unchanged at $25 billion.
A notification giving effect to the new FII investment ceilings will be issued by market regulator Securities and Exchange Board of India soon.
"The present enhancement will increase investment in debt securities and help in further
development of the government securities and corporate bond markets in the country," the official added.
The decision, which was taken after a review of the macro-economic situation, would enhance capital flows and make additional financial resources available to the Indian corporate sector, he said.
The official added that the increase in investment limits became necessary as ". . . little space was available for further FII investment in G-secs and corporate bonds".
As against the FII investment ceiling of Rs 43,650 crore (Rs 436.5 billion) in G-secs, foreign institutions had invested Rs 41,253 crore (Rs 412.53 billion) as of October 31, 2011.
Similarly, in the case of corporate bonds, FIIs have invested Rs 68,289 crore or Rs 682.89 billion (as of October 31, 2011) as against the ceiling of Rs 74,416 crore (Rs 744.16 billion).
