Attention of Authorised Dealer Category - I (AD Category – I) banks is
invited to sub-paragraphs i) & ii) of Paragraph 1 of Schedule 5 to FEMA
Notification No.20 dated May 3, 2000, as amended from time to time, in terms of
which Foreign Institutional Investors are allowed to purchase, on repatriation
basis, dated Government securities/treasury bills, listed non-convertible
debentures/bonds, commercial papers issued by an Indian company and units of
domestic mutual funds and Security Receipts issued by Asset Reconstruction
Companies either directly from the issuer of such securities or through a
registered stock broker on a recognized stock exchange in India, provided that
:
- the FII shall restrict allocation of its total investment between equity and
debt instruments (including dated Government Securities and Treasury Bills in
the Indian capital market) in the ratio of 70:30;
- if the FII desires to invest up to 100 per cent in dated Government
Securities including Treasury Bills, non-convertible debentures/bonds issued by
an Indian company, it shall form a 100 per cent debt fund and get such fund
registered with SEBI; and
- the total holding by a single FII in each tranche of scheme of Security
Receipts shall not exceed 10 per cent of the issue and the total holdings of all
FIIs put together shall not exceed 49 per cent of the paid up value of each
tranche of scheme of Security Receipts issued by the Asset Reconstruction
Companies.
- In order to accord flexibility to the FIIs to allocate their investments
across equity and debt instruments, the Securities and Exchange Board of India
(SEBI), in consultation with the Government of India, vide its Circular No
IMD/FII & C/33/2007 dated October 16, 2008 has dispensed with the conditions
provided in Regulation 15 (2) of the SEBI FII Regulations pertaining to
restrictions of 70: 30 ratio of investments in equity and debt, respectively.
Accordingly, it has been decided, to dispense with the existing provisions under
FEMA Regulations, as mentioned in proviso (i) above. However, the stipulations
made in proviso (iii) in respect of FII holdings in security receipts issued by
Asset Reconstruction Companies shall continue.
- AD Category – I banks may bring the contents of this circular to the notice
of their constituents and customers concerned.
- Necessary amendments to the 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 issued 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 is
without prejudice to permissions/approvals, if any, required under any other
law.