FII limit in G-secs to be revised twice annually, says Rajan

Promising a steady increse in FII investment limit in Government bonds, RBI Governor Raghuram Rajan on Thursday said the ceiling will be revised twice a year and efforts are being made to make such investment easier.Currently, the investment limit for government securities (G-secs) by Foreign Institutional Investors (FIIs) is $30 billion annually. Out of the $30 billion, FIIs are allowed to invest $25 billion, whereas $5 billion is for long-term investors.

“I think we are committed in steady expansion in the absolute value while ensuring that we don’t go overboard and become overly reliant for FIIs financing in the Government bond market or corporate bond market,” he said while replying to a question in this regard.Addressing a press conference after the board meeting, Rajan said the central bank has “broadly decided” to look at the FII investment limit twice a year.

“...We just have to fix the dates with SEBI. When we fix those limits and then we will examine twice a year on that basis how much we will change.“I think history should suggest that we will never reduce such limits and we will take a view on how much and when we increase the limits based on the dates we pick,” he said, adding “we are trying to look at various ways that foreign investors can participate in an easy way”.

The RBI is keen to attract more overseas funds to keep the value of the domestic currency in comfort zone.last month, Finance Secretary Rajiv Mehrishi had said the Finance Ministry was in favour of fixing FII investment limit for government bonds in rupee terms instead of dollar as it would provide more headroom for investments by foreign investors.Earlier, the RBI had suggested the Ministry to set FIIs limit for investment in G-secs in domestic currency.