Centre ups FII cap in gilts, bonds

Move to woo funds for infra

In addition, the government has raised the FII cap in bonds floated by companies engaged in the infrastructure business, which will provide much-needed funds for the crucial sector.
The caps were raised as FIIs are close to reaching the existing cap of US$20 billion, having invested over US$17 billion in Indian papers. Finance Minister Pranab Mukherjee said the move will help enhance the flow of FII funds into debt markets.

The government allowed FIIs to invest up to US$5 billion more in both government bonds and corporate papers, after they reach the current cap of US$5 billion and US$15 billion in the two instruments, respectively. In addition, FIIs can additionally invest US$5 billion in bonds of infrastructure companies and government bonds with a residual maturity of over 5 years.

“The government has increased the current limit of FII investment in government securities by US$5 billion, raising the cap to US$10 billion and the incremental limit of US$5 billion be invested in securities with residual maturity of over five years,” an official statement said. It further added that the current limit of FII investment in corporate bonds has also been increased by US$5 billion, raising the cap to US$20 billion.

The FII limit in corporate bonds with residual maturity of over five years issued by companies in the infrastructure sector would also be increased by US$5 billion.