FII investments in Debt Securities - SEBI - IMD/FII/20/2006

FII Custodian Division Investment Management Department Website: www.sebi.gov.in Fax No.: 91 22 22870095 Circular No. IMD/FII/20/2006 April 05, 2006 To All Foreign Institutional Investors, and Custodians of Securities Sub: FII investments in Debt Securities The Government of India has raised the cumulative debt investment limits from US $1.75 billion to US $2 billion and US $0.5 billion to US $1.5 billion for FII/Sub Account investments in Government securities and Corporate Debt, respectively. As mentioned in our Circular No. IMD/FII/19/2005 dated March 11, 2005 the limits are separate and not fungible. In view of the above, the following shall be applicable with immediate effect: 1. The limits of USD 2 billion and USD 1.5 billion will be allocated among the 100% debt and general 70:30 FIIs/Sub Accounts in the following manner: (figures in USD bn) Type of FIIs 100% debt 70:30 Total permissible Limit Existing limits Govt. securities/ T-Bills 1.55 0.20 1.75 Corporate Debt - - 0.50 Total 2.25 Revised Limits Govt. securities/ T-Bills 1.75 0.25 2.00 Corporate Debt 1.35 0.15 1.50 Total 3.50 2. Separate headrooms of USD 25 million and USD 15 million will be maintained for investments by general 70:30 FIIs/ Sub Accounts in Government securities and Corporate Debt, respectively i.e. the FIIs/ Sub Accounts are free to invest till the total investment limit reaches USD 225 million and USD 135 million in Government securities and Corporate Debt, respectively. Thereafter, the approvals for limit allocation shall be granted as per the procedure mentioned in our Circular No. IMD/FII/16/2004 dated November 2, 2004. It is to be noted that the Board reserves the right to withdraw unused allocation, in case there is demand from any FII, in order to enable optimum use of the allocations. 3. Further, it has now been clarified by the Government of India and Reserve Bank of India that FII investments shall be restricted to only listed debt securities of companies. It is also clarified that the FIIs subscription to Commercial Papers would be within the ceiling of US $1.5 billion (earlier US $500 million) fixed for debt instruments (other than G-Sec and T-Bills). 4. The revised individual limits for investment in Government securities and limits for Corporate Debt will be advised to the 100% debt FIIs/ Sub Accounts separately. A copy of this circular is available at the web page F.I.I. on our website www.sebi.gov.in. The custodians are requested to bring the contents of this circular to the notice of their FII clients. Yours faithfully, Sangeeta Uchil Deputy General Manager