FII & Custodian Division

Investment Management Department

Website: www.sebi.gov.in

Circular No. IMD/FII & C/ 23 /2006

December 14, 2006

To

All Foreign Institutional Investors, and

Custodians of Securities

Sub: FII investments in Debt Securities

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The rise in the cumulative debt investment limits from US $1.75 billion to US $2 billion and US $0.5 billion to US $1.5 billion for FII/Sub Account investments in Government securities and Corporate Debt, respectively was informed by SEBI vide Circular No. IMD/FII/20/2006 dated April 05, 2006. The allocation of limits among 100% debt and general 70:30 FIIs/ Sub Accounts was also informed in the aforementioned Circular. Subsequently, the individual limits were informed to the 100% debt FIIs/ Sub Accounts.

Now, after having reviewed the utilization versus the allocation of the aforementioned limits allocated among the 100% debt and 70:30 FIIs/ Sub Accounts, the following revised limits shall be applicable with immediate effect:

The limits of USD 2 billion and USD 1.5 billion will be allocated among the 100% debt and general 70:30 FIIs/Sub Accounts in the following manner:

(figures in USD bn)

Type of FIIs 100% debt 70:30 Total permissible limit
Existing limits
Govt. securities/ T-Bills 1.75 0.25 2.00
Corporate Debt 1.35 0.15 1.50
Total 3.50
Revised Limits
Govt. securities/ T-Bills 1.4 0.6 2.00
Corporate Debt 1.0 0.5 1.50
Total     3.50

The 70:30 FIIs/ Sub Accounts are free to invest till the total investment limit reaches USD 540 million and USD 450 million in Government securities and Corporate Debt, respectively. Thereafter, the approvals for limit allocation shall be granted as per the procedure mentioned in our Circular No. IMD/FII/16/2004 dated November 2, 2004 for the remaining amount of USD 60 million and USD 50 million, respectively maintained as head rooms.

3.. Separate ‘headrooms’ of USD 55 million and USD 80 million will be maintained for investments by 100% debt FIIs/ Sub Accounts in Government securities and Corporate Debt, respectively. These limits shall be allocated among the 100% debt FIIs/ Sub Accounts on a first come-first serve basis and a time limit of 7 days shall be provided to the respective applicant to utilize the limits requested, on the expiry of which the permission shall lapse.

4.It may be noted that the investment limits allocated for Upper Tier II Instruments vide our Circular No. IMD/ FII&C/23/2006 dated September 15, 2006 remain unchanged.

5.With a view to monitor the allocation and utilization of limits for Government and Corporate debt and Upper Tier II instruments, the custodians are advised to submit fortnightly reports to SEBI in the format enclosed in Annexure A. Reports for each instrument type should be filed on a separate spreadsheet and should be part of the same Excel workbook

T7.he reports should be submitted at the following email-id: fii_debt@sebi.gov.in. .

8.The revised individual limits for investment in Government securities and limits for Corporate Debt is being advised to the 100% debt FIIs/ Sub Accounts separately.

A copy of this circular is available at the web page “F.I.I.” on our website www.sebi.gov.in. The custodians are requested to bring the contents of this circular to the notice of their FII clients.

Yours faithfully,

Sangeeta Uchil

Deputy General Manager

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