The Reserve Bank today said the FII limit for investment in government securities has been increased by USD 5 billion within the total cap of USD 30 billion.
The central bank said the limit has been enhanced by reducing the investment limit for long term investors from USD 10 billion to USD 5 billion.
"It has been decided to enhance the investment limit in Government securities available to FIIs (Foreign Institutional Investors)/QFIs (Qualified Foreign Investor)/FPIs (Foreign Portfolio Investors) by USD 5 billion by correspondingly reducing the amount available to long-term investor from USD 10 billion to USD 5 billion within the overall limit of USD 30 billion," an RBI notification said.
Long-term investors include sovereign wealth funds (SWFs), multilateral agencies, pension, insurance funds and foreign central banks registered with Sebi.
Earlier this year, the limit for long-term investors for investment in government securities was raised from USD 5 billion to USD 10 billion within the total limit of USD 30 billion available to them.
The RBI, however, said the increment investment limit of USD 5 billion shall be required to be put in government bonds with a minimum residual maturity of three years.
It further said all future investment against the limit vacated, when the current investment by an FII/QFI/FPI runs off either through sale or redemption shall, also be required to be made in Government bonds with a minimum residual maturity of three years.
"There will be no lock-in period and FIIs/QFIs/FPIs shall be free to sell the securities to the domestic investors," the notification said.