FII limit in infrastructure firms hiked

Till now, the limit for such investment was US$15 billion in corporate debt, with an additional limit of US$5 billion in bonds with a residual maturity of over five years.
This additional limit has been raised to US$25 billion, taking the maximum limit of FII investment in bonds and non-convertible debentures issued by infrastructure companies to US$40 billion, RBI said in a notification.

The apex bank added that such investments by FIIs would have a minimum lock-in period of three years. However, the FIIs can trade among themselves during the lock-in period.

The relaxation in the limit comes at a time when the government has announced plans to double investments in the infrastructure sector to US$1 trillion during the 12th Plan (2012-17).

It wants the private sector to contribute at least half of the intended investment. The raising of the limit is likely to boost efforts in that direction.

Meanwhile in a separate notification, the RBI said that custodian banks could issue irrevocable payment commitments (IPC) on behalf of FIIs to stock exchanges and clearing houses for purchase of shares under portfolio investment scheme. IPC is a kind of instrument used to provide financial guarantee.