SEBI limits FIIs’ debt reinvestment period

The Securities and Exchange Board of India (SEBI) has limited the reinvestment period of debt instruments allocated to foreign institutional investors. SEBI today said FIIs couldn't reinvest any new debt limit to be allocated to them through the auction route.

The limit, allocated to FIIs or their sub-accounts will lapse either at the time of sale of the security or at redemption, SEBI said in a release today.

FIIs could earlier reinvest proceeds within five days to retain the limits.

''It has been decided that henceforth re-investment period shall not be allowed for all new allocations of debt limit to FIIs/sub-accounts. Thus, limits acquired in the bidding sessions henceforth will expire or lapse on either sale or redemption at maturity of the debt investments. These limits then will again be allocated in subsequent bidding processes'', SEBI said in a release.

For those FIIs and sub-accounts that already have acquired limits and /or invested in debt, these existing limits will expire if the total sales made from the existing debt portfolio (current debt investment and the un-utilized limit currently with the entity, if any) is twice the size of its debt portfolio as on the date of the circular or at the expiry of two years from the date of the circular (2 January 2014)..

Once the above threshold is breached, in case of any sale or redemption of the investments, the limit will expire/lapse. These limits then may again be allocated in subsequent bidding processes.