What changed
The sub-limit for FIIs and long-term investors in dated government securities was raised by USD 5 billion to USD 15 billion, and the 3-year residual maturity condition for these investments was removed. The overall limit for FII investment in government securities increased from USD 20 billion to USD 25 billion. For corporate debt, the non-infrastructure sector limit rose by USD 5 billion to USD 25 billion, raising the total corporate debt limit to USD 50 billion, with the enhanced portion not available for CDs or CPs.
What it means for you
Banks and lenders can expect increased foreign capital inflows into government securities and corporate bonds, potentially lowering yields and easing borrowing costs. The removal of the residual maturity condition for long-term investors in dated securities broadens the investor base and may deepen the bond market. The higher corporate debt limit, excluding short-term instruments, encourages longer-term foreign investment in Indian companies.
What you must do
- Update internal systems and reporting to reflect the revised FII investment limits for government securities and corporate debt.
- Advise clients on the new USD 25bn government securities limit and the USD 15bn sub-limit for long-term investors without residual maturity restrictions.
- Ensure compliance that the enhanced USD 5bn corporate debt limit is not used for investments in CDs or CPs.
- Monitor FII flows to manage liquidity and yield impacts on government and corporate bond markets.
Who it affects
Category-I Authorised Dealer banks, SEBI-registered Foreign Institutional Investors (FIIs), Long-term investors (SWFs, multilateral agencies, pension/insurance/endowment funds, foreign central banks), Indian companies issuing corporate bonds and NCDs, Infrastructure sector bond issuers
What is the new total limit for FII investment in government securities?
The total limit has been increased from USD 20 billion to USD 25 billion, with a sub-limit of USD 15 billion for long-term investors, up from USD 10 billion.
Are there any residual maturity conditions for the enhanced government securities sub-limit?
No, the 3-year residual maturity condition has been removed for the entire USD 15 billion sub-limit, but investments in short-term paper like Treasury Bills remain prohibited.
What is the revised corporate debt limit and its sub-limits?
The total corporate debt limit is now USD 50 billion, with USD 25 billion each for infrastructure and non-infrastructure sectors. The enhanced USD 5 billion for non-infrastructure cannot be used for CDs or CPs.