Foreign investors will now have more leeway to utilise funds for corporate debt categories as their investment limit for commercial papers has been lowered to USD 2 billion.
In separate circulars, RBI and Sebi today said the existing commercial paper sub-limit of USD 3.5 billion has been reduced to USD 2 billion.
"The balance USD 1.5 billion shall, however, continue to be part of the total corporate debt limit of USD 51 billion and will be available to eligible foreign investors for investment in corporate debt," Reserve Bank of India said.
According to the central bank, the sub-limit of USD 3.5 billion for commercial papers "is being presently utilised only to the extent of around 58 per cent of the limit put in place by Sebi".
The move to reduce the limit is aimed to "encourage long term investors", RBI noted.
The cap would be applicable for Foreign Institutional Investors, Qualified Foreign Investors and long term investors.
Securities and Exchange Board of India said in its circular that "eligible investors may invest in commercial papers only up to USD 2 billion and up to USD 5 billion in credit enhanced bonds within the limit of USD 51 billion".
The circular would come into effect immediately.
