SEBI raises FII investment limit in bonds to $200 million

Mumbai: The Securities and Exchange Board of India (SEBI) has raised the ceiling on foreign institutional investors' (FII) investment in bonds to $200 million. It also increased the overall foreign investment limits.

Last week, the government raised the limit for total FII investment in government bonds to $5 billion from $3.2 billion, and in corporate bonds to $3 billion, from $1.5 billion.

"The enhanced limits shall be allocated among the FIIs on a 'first come, first served' basis ... subject to a ceiling of $200 million per registered entity," the Securities and Exchange Board of India (SEBI) said in a statement.

Last week, the government raised the limit for total FII investment in government bonds to $5 billion from $3.2 billion, and in corporate bonds to $3 billion, from $1.5 billion.

In an earlier circular, issued by last month, SEBI had asked FIIs to ensure that their sub-accounts have not issued any offshore derivative instrument (ODIs), including participatory notes, or purchased them from non-resident Indians (NRIs) or resident Indians.

FIIs are now asking their sub-accounts to wind up as they (FIIs) may find it difficult to comply with the regulator's latest requirement.

FIIs are not ready to assume the responsibility of sub-accounts, as most of the time they have little knowledge about the end beneficiary (real investor) in their sub-accounts. Since the undertaking holds FIIs answerable for any activity through the sub-account, they are unwilling to take on the liability and jeopardise their own businesses in India.

A sub-account includes institutions, funds and bodies established outside India, on whose behalf Sebi-registered FIIs make investments through participatory notes.