India Raises FII Cap In Govt, Corp Debt By $5B Each

17 November, 2011

India has raised the ceiling on foreign institutional investment in government and corporate bonds by $5 billion each, a finance ministry official said on Thursday, to help boost foreign inflows after the existing limits were almost reached.

“The policy has been reviewed in the context of India’s evolving macroeconomic situation, the need for enhancing capital flows and making available additional financial resources for India’s corporate sector,” Thomas Mathew, joint secretary in the finance ministry, told reporters.

The move could also help ease the pressure on the rupee, which has slumped nearly 13.5 per cent from its year-high in July due to a widening trade deficit and falling foreign equity inflows.

Investments by companies in India have shrunk after the RBI raised interest rates 13 times since early 2010, and consumer spending has dropped hurting growth.

The slowdown has dented government revenue collections and New Delhi has stepped up its borrowing, putting upward pressure on bond yields and the availability of cash for the corporate sector.

The limit on foreign institutional investor (FII) investment in government bonds has been raised to $15 billion from $10 billion, which has almost been reached, Mathew said.

The decision to hike the FII limit in the government debt along with a RBI move to buy back bonds worth up to $2 billion next week helped cool bond yields on Thursday.

At 0925 GMT, the most-traded 10-year bond yield was down 9 basis points at 8.79 per cent.

The FII ceiling in corporate bonds has been raised to $20 billion as the existing $15 billion ceiling has almost been reached, Mathew said.

Together with a $25 billion that can be invested in infrastructure bonds, the total FII limit in corporate bonds stand at $45 billion.

The Securities and Exchange Board of India, the capital markets regulator, is expected to notify the decisions in the next few days, the official said.

The government may also increase a $30 billion ceiling on overseas borrowings by companies, he said.

Companies have raised about $20 billion through external commercial borrowings between April and October, Mathew said.


Leave Your Comment
Analysis: Narendra Modi's 'Make in India' has failed to inspire FDI in manufacturing

Analysis: Narendra Modi’s ‘Make in India’ has failed to inspire FDI in manufacturing

Aman Malik 1 year ago
In a move that marks a radical shift in India’s foreign investment policy so far, the Union government, on Monday, liberalized the foreign direct investment...
India Looking At All Options To Attract Capital

India Looking At All Options To Attract Capital

Reuters 6 years ago
The government is looking at all options to attract foreign capital, a senior finance ministry official said, adding that he hoped Moody’s move to unify...
New Share Issues To Sustain Fund Flows Into India

New Share Issues To Sustain Fund Flows Into India

Reuters 8 years ago
Foreign fund flows into India in 2010 could match or exceed a near-record $17 billion in 2009 but will not give the Mumbai stock market...
No Comments

India Raises FII Cap In Govt, Corp Debt By $5B Each

Powered by WordPress.com VIP