This would increase the total limit available to foreign institutional investors (FIIs) for investment in corporate bonds to USD 40 billion.

The minimum tenor of the investment in listed corporate bonds would be 5 years. "These investments are now permissible in unlisted instruments," Sebi said in a statement.

Finance Minister Pranab Mukherjee in his Budget speech for 2011-12 had proposed raising the FII investment limit for investment in corporate bonds of infra companies, taking the total limit available to FIIs for investment in corporate bonds to USD 40 billion.

But the FII investment in unlisted bonds shall locked for three years, the statement added.

"During the lock-in period, FIIs will be allowed to trade among themselves. During the lock-in period, the investments cannot, however, be sold to domestic investors," Sebi added.

"Since most infrastructure companies are organised as Special Purpose Vehicles (SPVs), FIIs would also be permitted to invest in unlisted bonds with a minimum lock-in period of three years," a finance ministry statement said.

"In order to enhance the flow of funds to infrastructure sector, it was announced in the budget that the FII limit for investment in the corporate bonds would be increased...," the statement added.

Today's Securities and Exchange Board of India (SEBI) circular would pave way for implementation of the Budget announcement.

"To facilitate trading by FIIs, a special trading window shall be provided by Exchanges on the same lines as is available for equities in companies where the overall FII investment reaches the maximum limit," the statement added.

India is planning to invest about USD 1 trillion during the 12th five year plan, beginning March 2012, to fund a huge infrastructure development programme.