A.P.(DIR Series) Circular No. 48
July 3, 2017
All Authorized Persons
Madam / Sir
Investment by Foreign Portfolio Investors (FPI) in Government Securities
Medium Term Framework – Review
Attention of Authorised Dealer Category-I (AD Category-I) banks is invited to Schedule 5 to the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 notified vide Notification No. FEMA.20/2000-RB dated May 3, 2000, as amended from time to time.
Review of the Medium term Framework
2. The current Medium Term Framework (MTF) for FPI investment in Central Government Securities (G-secs) and State Government Securities (SDLs) was introduced in October 2015 with the following major features:
3. Currently ‘long term’ category of FPI investors accounts for about 20% of the total investment by FPIs in Central Government securities. In order to recalibrate the Framework to meet the objective of a preference for long-term investors and also with a view to manage the macro-prudential implications of evolving capital flows, the MTF has been reviewed. Based on the review, the following modifications are made to the Framework.
4. RBI may, in future, continue to calibrate some features of the MTF depending on the evolving macro-economic conditions.
Revision of Limits for the Jul-Sep 2017 Quarter
5. The limits for investment by FPIs in Central Government Securities and State Development Loans (SDLs) for the quarter July-September 2017 are increased by INR 110 billion and INR 61 billion, respectively, and allocated as under:-
|Limits for FPI investment in Government Securities|
|Central Government securities||State Development Loans||Aggregate|
|General||Long Term||Total||General||Long Term||Total|
6. The revised limits will be effective from July 4, 2017.
7. All other existing conditions, including the security-wise limits, investment of coupons being permitted outside the limits and investments being restricted to securities with a minimum residual maturity of three years, will continue to apply.
8. The operational guidelines relating to allocation and monitoring of limits will be issued by the Securities and Exchange Board of India (SEBI).
9. AD Category – I banks may bring the contents of this circular to the notice of their constituents and customers concerned.
10. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/approval, if any, required under any other law.
(T. Rabi Sankar)
Chief General Manager