RBI/2010-11/492
A.P. (DIR Series) Circular No. 55
April 29, 2011
To,
All Category – I Authorised Dealer banks
Madam / Sir,
Foreign investments in India by SEBI registered FIIs in other securities
Attention of Authorised Dealers Category – I (AD Category - I) banks is invited
to paragraph 1 of Schedule 5 to the Foreign Exchange Management (Transfer or
Issue of Security by a Person Resident outside India) Regulations, 2000 notified
vide
Notification No. FEMA 20 / 2000 -RB dated May 3, 2000 as amended from time
to time, in terms of which, a SEBI registered Foreign Institutional Investor
(FII) may purchase, on repatriation basis, listed non-convertible debentures /
bonds issued by an Indian company, subject to such terms and conditions
mentioned therein and limits as prescribed for the same by the RBI & the SEBI
from time to time. The present limits for such investments is USD 15 billion for
FII investment in corporate debt with an additional limit of USD 5 billion for
FII investment in bonds with a residual maturity of over five years, issued by
Indian companies which are in the infrastructure sector, where “infrastructure”
is defined in terms of the extant guidelines on External Commercial Borrowings
(ECB).
- It has now been decided, in consultation with the Government, to enhance the
FII investment limit in listed non-convertible debentures / bonds, with a
residual maturity of five years and above, and issued by Indian companies in the
infrastructure sector, where ‘infrastructure’ is defined in terms of the extant
ECB guidelines, by an additional limit of USD 20 billion taking this limit from
USD 5 billion to USD 25 billion (with this the total limit available to FIIs for
investment in listed non convertible debentures / bonds would be USD 40 billion
with a sub limit of USD 25 billion for investment in listed non-convertible
debentures / bonds issued by corporates in the infrastructure sector). Further,
such investment by FIIs in listed non-convertible debentures / bonds would have
a minimum lock-in period of three years. However, FIIs are allowed to trade
amongst themselves during the lock-in period. It has also been decided to allow
SEBI registered FIIs to invest in unlisted non-convertible debentures / bonds
issued by corporates in the infrastructure sector, provided that such investment
is as per the aforementioned terms and conditions.
- AD Category - I banks may bring the contents of the circular to the notice of
their customers/constituents concerned.
- Necessary amendments to Foreign Exchange Management (Transfer or Issue of
Security by a Person Resident outside India) Regulations, 2000
(Notification No.
FEMA 20/2000-RB dated May 3, 2000) are being notified separately.
- 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,
(Meena Hemchandra)
Chief General Manager-in-Charge