Market regulator Securities & Exchange Board of India, on Thursday, raised the limit of cumulative investment in government debt securities by foreing instutional investors (FIIs) and their sub accounts by $600 million to $3.2 billion.

“It has now been decided to further enhance the limit (for FIIs/sub-accounts cumulative investment in government/treasury bills) to US$3.2 billion,” the capital market watchdog said in a circular.

Corporate debt

Earlier last year, Sebi had raised this limit to $2.6 billion from $2 billion. The market regulator has also decided to treat all investments by FIIs and their sub-accounts in units of debt-oriented mutual funds as corporate debt only.

As such, FII investment in these units would have to prescribe to 1.5-billion-dollars ceiling, as is stipulated for corporate debt.

Currently, there was no uniformity whether to consider investments by FIIs in debt-oriented mutual funds as debt or equity.

According to Sebi, the issue was discussed with the Reserve Bank of India, which in turn advised that the investment by FIIs/ sub-accounts in units of debt-oriented mutual funds be considered as investments incorporated.

Following the decisions there will be henceforth no demarcation between 100 per cent debt and normal 70 :30 FIIs/sub-accounts for allocation of debt investment limits.

The allocation of unutilised/unallocated limits in govt. securities/T-Bills shall be on first-come-first-serve basis. The allocation will be valid for a period of 15 days after which it will lapse.