Sebi amends FPI norms for government bonds

Looking to increase fund flows from overseas investors, Sebi today allowed Foreign Portfolio Investors to invest their coupons received on investments in government securities back into such bonds.

These investments would be allowed even after the FPIs having fully utilised the applicable limits of USD 30 billion, Sebi said in a circular.

The changes have been made by Sebi in its FPI guidelines following a decision taken in this regard by the Reserve Bank earlier this week during its monetary policy review.

"Pursuant to the announcements made in the Sixth Bi-monthly Monetary Policy Statement, 2014-15, dated February 3, 2015 by the RBI, it has been decided that investment of coupons in Government securities will be enabled even when the existing limits for FPIs are fully utilised," Securities and Exchange Board of India (Sebi) said in a circular today.

A coupon on a bond is a periodic interest payment that an investor recieves during the life of the security.

The amendments would come into effect immediately, and the same has notified by the Reserve Bank of India (RBI) today as well.

For the purpose of investment of coupons, the FPIs shall have an investment period of 5 working days from the date of receipt of the coupon, Sebi said.

"A re-investment facility of 5 working days shall be provided on the Government securities that have been purchased by utilising the coupons," the regulator added.

According to the new guidelines, the coupons invested in purchasing government bonds would be classified "into a separate investment category which is over and above the USD 30 billion government debt limit".

All other existing conditions for investment by FPIs in the government securities market remain unchanged for this additional facility as well.

"It is further clarified that coupons received on these Government securities purchased by investment of coupons shall also have the same facility," the regulator noted.

To implement the new norms, Sebi has asked depositories to put in place the necessary systems for the daily reporting by the custodians of the FPIs and also disseminate this coupon investment data along with the daily debt utilisation data.