The govt allows FIIs to invest $30 bln in securities, of which $20 bln is in the open category and $10 bln is reserved for sovereign and pension funds

New Delhi : The government is considering hiking the FII investment sub-limit in its bonds to USD 25 billion without disturbing overall USD 30 billion FII debt cap, a top finance ministry official said.

“There is general demand and there is a space to increase FII limit in government debt…No intent to increase overall USD 30 billion FII debt cap,” Finance Secretary Arvind Mayaram said.

Currently, India allows FIIs of up to USD 30 billion in government bonds, including USD 20 billion for all and USD 10 billion for specific investors like foreign central banks, sovereign wealth funds, pension funds and insurance funds. The limit under USD 20 billion has been almost fully exhausted.

“There is demand and space for rejigging existing FII debt window, we may use USD 5 billion unutilised sovereign wealth funds (SWF) as part of FII debt cap,” Mayaram said.

Gilt prices rose on hopes that the RBI will soon tweak the FII investment limit. The 10-year benchmark 8.83%, 2023 bond opened up 9 paise from Friday, and rose another 30 paise intraday on hope that the FII gilt investment limit in the open category would be hiked.

The finance ministry has proposed allowing FIIs to buy up to $5 bln more of government bonds from the $10 bln quota earmarked for long-term investorssuch as sovereign and pension funds.

The proposal comes as foreign funds have almost exhausted their investment limit of $20 bln in government bonds. On the other hand, just a little over 20% of the $10 bln set aside for sovereign wealth funds, pension funds, insurance firms and foreign central banks have been utilised.     -PTI

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