RESERVE BANK OF INDIA
Foreign Exchange Department
Central Office
Mumbai - 400 001
A. P. (DIR Series) Circular No. 135
June 25, 2012
To
All Category – I Authorized Dealer banks
Madam / Sir,
Foreign investment in India by SEBI registered FIIs in Government securities and
SEBI registered
FIIs and QFIs in infrastructure debt
Attention of Authorized Dealer Category-I (AD Category-I) banks is invited to
Schedule 5 to
FEMA Notification No.20/2000-RB dated May 3, 2000, as amended from
time to time and
A.P.(DIR Series) Circular No.55 dated April 29, 2011, and
A.P.(DIR Series) Circular No.42 dated November 3, 2011 in terms of which FIIs
are allowed to (i) invest in non-convertible debentures / bonds issued by Indian
companies in the infrastructure sector and non-convertible debentures / bonds
issued by Non-Banking Financial Companies categorized as ‘Infrastructure Finance
Companies’(IFCs) by the Reserve Bank of India within the overall limit of USD 25
billion; and (ii) invest in Government securities within an overall limit of USD
15 billion; subject to terms and conditions ibid.
- Attention of the AD Category-I banks is also invited to A.P. (DIR Series)
Circular No.8 dated August 9, 2011, in terms of which Qualified Foreign
Investors (QFIs), as defined therein were allowed to invest in units of Mutual
Funds debt schemes upto a limit of USD three billion within the overall limit of
USD 25 billion for FII investment in non-convertible debentures / bonds issued
by Indian companies in the infrastructure sector.
- On a review it has been decided as under :
Government Securities
- The limit of USD 15 billion for FII investment in Government securities
stands enhanced with immediate effect by USD 5 billion to USD 20 billion. It has
also been decided to rationalize the conditions governing the investments under
this scheme by making the residual maturity of the instrument at the time of
first purchase by FIIs and SEBI registered eligible non- resident investors in
IDFs and foreign Central Banks to be at least three years for a sublimit of USD
10 billion. Accordingly, the existing and new sub limits and attendant
conditions are summarized as follows :
| Existing position |
New position |
Remarks |
|
|
Sub
limit |
Conditions |
Sub limit |
Conditions |
|
USD
10
billion |
No conditions |
USD 10 billion |
No conditions |
No change |
USD
5
billion |
Residual maturity
of at least 5 years |
USD 10 billion (existing sub limit of USD
5 billion plus the enhancement of USD
5 billion) |
Residual maturity of the instrument
at the time of first purchase by
FIIs to be
at least three years |
Increase in sub limit
and change in conditions |
Further, in order to broad base the non resident investor base for Government
securities, it has also been decided to allow long term investors like Sovereign
Wealth Funds (SWFs), Multilateral agencies, endowment funds, insurance funds,
pension funds and foreign Central Banks to be registered with SEBI to also
invest in Government securities within this enhanced limit of USD 20 billion.
Infrastructure Debt
- The conditions for the limit of USD 22 billion including the sub-limit of
USD 5 billion with one year lock-in/residual maturity requirement and USD 10
billion for non resident investment in IDFs (which are all within the overall
limit of USD 25 billion for investment in infrastructure corporate bonds) have
been changed as under :
- The lock-in period for investments under this limit has been uniformly reduced
to one year; and
- The residual maturity of the instrument at the time of first purchase by an
FII/ eligible IDF investor would be at least fifteen months.
- Further, as a measure of relaxation, QFIs can now invest in those MF
schemes that hold at least 25 per cent of their assets (either in debt or equity
or both) in the infrastructure sector under the current USD 3 billion sub-limit
for investment in mutual funds related to infrastructure. This relaxation would
be subject to review.
- Necessary amendments to the Foreign Exchange Management (Transfer of Issue of
Security by a Person Resident outside India) Regulations, 2000 notified vide
Notification No. FEMA 20/2000-RB dated May 3, 2000 are being notified
separately.
- AD Category – I banks may bring the contents of the circular to the notice of
their constituents.
- The directions contained in this circular have been issued under Sections
10(4) and 11(1) of the Foreign Exchange Management Act,
- 1999 (42 of 1999) and
are without prejudice to permissions / approvals, if any, required under any
other law.
Yours faithfully,
(Rudra Narayan Kar)
Chief General Manager
RBI/2011-12/618
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