FII investments in Debt Securities - SEBI - IMD/FII/19/2005

FII Custodian Division Investment Management Department Email: [email protected] Website: www.sebi.gov.in Fax No. 91 22 22870095 Circular No. IMD/FII/19/2005 March 11, 2005 To All Foreign Institutional Investors, and Custodians of Securities Sub: FII investments in Debt Securities Please refer to our Circular No. IMD/FII/18/2004 dated December 2, 2004, whereby, it was informed that a cumulative sub-ceiling of USD 0.5 billion outstanding has been fixed for FII investments in corporate debt. This cap would be over and above the sub-ceiling of USD 1.75 billion for Government debt under the overall ECB ceiling. Pursuant to the clarification from Ministry of Finance, Government of India, the sub ceilings for Government securities and for corporate debt would be separate and would not be fungible. The sub ceilings of USD 1.75 billion and USD 0.5 billion shall be applicable for FIIs under both 100% debt route and the general 70:30 route. In view of the above, the following shall be applicable with immediate effect: 1. Overall investment limit under the 70:30 route in dated Government securities and T-Bills shall remain at USD 200 million. Monitoring and allocation of investment limit shall remain the same as mentioned in our Circular No. IMD/FII/16/2004 dated November 2, 2004. 2. It may be recalled that, earlier, both Government and Corporate debt investments of 100% debt FIIs/ Sub Accounts were reckoned within the limit of USD 1.55 billion. Henceforth, pursuant to the clarification from the Ministry of Finance, investments in Government debt only shall be reckoned within the sub ceiling of USD 1.55 billion. The FII investments in corporate debt shall now be, therefore, reckoned within the sub ceiling of USD 0.5 billion. To conform to the sub ceiling of USD 0.5 billion, there shall be no further investment or rollover of existing position in corporate debt by both 100% debt and general 70:30 FIIs/ Sub Accounts till the holdings fall within the stipulated cap of USD 0.5 billion. Subsequently, the limit of USD 0.5 billion shall be allocated among 100% debt and 70:30 FIIs/ Sub Accounts. 3. Additionally, any further investment in Government debt within the sub ceiling of USD 1.55 billion may be undertaken by 100% debt FIIs/ Sub Accounts only up to the extent of the unutilized portion of their notified limits. The redeemed portion of the corporate debt within the limit can be utilized for investment in Government debt only. However, those 100% debt FIIs/ Sub Accounts, whose holdings, as on date, are in excess of the limits allocated to them, should not undertake any fresh investment or rollover till their total holdings fall within the limits communicated to them earlier. 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, D. Chanda Chief General Manager CC: The Chief General Manager, Exchange Control Department, Reserve Bank of India, Central Office, Central Office Building, Mumbai., 400 001