Centre might raise FII debt limit by $5 b

The government is considering a proposal to raise the ceiling on foreign investments in government and corporate bonds by $5 billion each, a senior finance ministry official said, as the country looks to increase vital capital flows.

The official did not specify which debt categories would be affected, and whether the proposal involved raising the overall debt limits for foreign investors or entail reshuffling limits between the different debt categories. The official declined to be identified as they are not authorised to speak to media.

India caps the amount that foreign institutional investors (FIIs) can buy into domestic debt at $66.5 billion, which is distributed through a number of categories across government, corporate and infrastructure debt, some of which impose tenor or lock-in restrictions.

Easing India's complicated rules on debt investments for foreign institutional investors (FIIs) has been one of the measures expected by markets, as the country looks to boost capital inflows to fund a wide current account deficit (CAD) that poses a key vulnerability.

As a result of the different rules, foreign investors have traditionally steered towards the unrestricted categories of government and corporate debts.

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