Foriegn fund debt limits to expire upon auction: Sebi

The Securities and Exchange Board of India (Sebi), on Wednesday, said foreign fund houses that redeem or auction their debt holdings cannot reinvest the proceeds in new debt instruments till they have been assigned a fresh allocation limit in a subsequent auction.

Previously, the limit remained unchanged if a foreign institutional investor reinvested the proceeds within five days.

However, the regulator, on Wednesday, completely shut this door for FIIs, declaring that such limits allocated to the investor would lapse either at the time of sale of the security or upon redemption. However, the regulator said, “Fresh limits shall again be allocated in subsequent bidding processes.”

It further said if an FII decides to exit its holdings in the long-term infrastructure fund category during the lock-in period, the limit shall automatically be transferred to the buyer of the instrument.

However, it added that if an investor decides to sell or redeem his holdings after the lock-in period, the limit shall expire or lapse. The regulator also clarified that FIIs/sub-accounts are not required to sell their debt holdings after they reach the threshold mentioned above and can continue to retain the debt investments beyond the threshold.

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