The Reserve Bank of India (RBI) has allowed foreign portfolio investors (FPIs) to invest in treasury bills issued by the central government.
The central bank’s move comes close on the heels of foreign portfolio investors being permitted to invest in corporate bonds with minimum residual maturity of above one year.
“The requirement that investment in securities of any category [G-secs, State Development Loans or, in terms of this circular, corporate bonds] with residual maturity below one year shall not exceed 20% of total investment by an FPI in that category applies, on a continuous basis,” the central bank said in a circular issued on Tuesday.
Consistency
Incidentally, the April circular was issued to bring consistency across debt categories and hence it was stipulated that investments by an FPI in corporate bonds with residual maturity below one year should not exceed 20% of the total investment of that FPI in corporate bonds.
“At any point in time, all securities with residual maturity of less than one year will be reckoned for the 20% limit, regardless of the maturity of the security at the time of purchase by the FPI,” the RBI said in Tuesday’s circular.
According to the circular, if there are investments in securities with less than one year residual maturity as on May 2, and it constitutes more than 20% of the total investment in any category, the FPI will have to bring such share below 20% within a period of six months from the date of the circular.
