RBI increases foreign flow limit in bonds by over Rs 1 trillion for FY19

The Reserve Bank today upped debt investment limits for foreign portfolio investors (FPIs) across all segments, which will cumulatively result in an increase of over Rs 1 trillion in fiscal year 2018-19.

The total debt limit will rise to Rs 5.94 trillion by September 2018 and go up further to Rs 6.49 trillion by end of the fiscal year from the present Rs 5.45 trillion, a central bank notification said.

RBI has decided to increase the FPI investment limits in central government securities by 0.5 per cent to 5.5 per cent of outstanding stock of securities in 2018-19 and 6 per cent of outstanding stock of securities in 2019-20, it said.

The limits on FPI investment in state development loans (SDLs) would remain unchanged at 2 per cent of outstanding stock of securities, it said.

On corporate bonds, the FPI investment will be fixed at 9 per cent of outstanding stock of corporate bonds and all the sub categories within the segment will be discontinued.

In the government securities general category, the limit has been revised up to Rs 2.07 trillion by September 2018 and Rs 2.23 trillion by March 2019 from the present Rs 1.91 trillion, it quantified.

For the long term G-secs, the limits will go up to Rs 923 billion by end of the fiscal from the present Rs 651 billion, with a mid-fiscal cap of Rs 787 billion.

In the SDL-general category, the limit will go up from Rs 315 billion to Rs 348 billion in September 2018 and further to Rs 381 billion by end of the fiscal, it said.

For the long-term SDL bonds, the present limit of Rs 131 billion will come down to Rs 71 billion by September and will stay at the same level by March end as well, it said, attributing the reduction to the transfer of Rs 65 billion of limit transfer to g-secs.

In corporate bonds, the limits have been revised up to Rs 2.89 trillion in March 2019, from Rs 2.44 trillion presently with a milestone of Rs 2.66 trillion midway through the fiscal year.

The allocation of increase in G-sec limit over the two sub-categories general and long-term remains at the current ratio of 25:75. However, based on an assessment of investment interest, this ratio has been re-set at 50:50 for the year 2018-19, it said.

There will be a separate notification will be issued announcing coupon reinvestment arrangements in consultation with Sebi, it said.