FIIs allowed to invest up to $40 billion in infrastructure debt in India

The Reserve Bank of India (RBI) has announced a $20 billion hike in debt investment limit for foreign financial institutions (FIIs) in the country's infrastructure sector, from the current $25 billion to $40 billion.

RBI on Friday raised the additional investment limit for FIIs in the country's infrastructure from $5 billion to $25 billion, thus raising the overall limit to $40 billion.

The present limits for such investments is $15 billion for FII investment in corporate debt with an additional limit of $5 billion for FII investment in bonds with a residual maturity of over five years, issued by Indian companies which are in the infrastructure sector, where "infrastructure" is defined in terms of the extant guidelines on external commercial borrowings (ECB).

FIIs may also invest in non-listed convertible debentures / bonds issued by corporates in the infrastructure sector up to $25 billion, RBI said in a notification.

Such investments in non-convertible debentures / bonds issued by Indian companies, however, should have a minimum residual maturity of five years and above.

Further, such investment by FIIs in non-convertible debentures / bonds would have a minimum lock-in period of three years. However, FIIs may trade amongst themselves during the lock-in period.

RBI also announced amendments to the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000, allowing SEBI-registered FIIs to purchase, on repatriation basis, listed non-convertible debentures / bonds issued by an Indian company, subject to the terms and conditions mentioned therein and limits as prescribed by the RBI and the SEBI from time to time.

RBI said it has carried out necessary amendments to the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 in consultation with the government.