**Summary:**
This circular, A.P. DIR Series Circular No. 4, issued by the Reserve Bank of India (RBI) on September 30, 2016, addresses investment by Foreign Portfolio Investors (FPIs) in Government Securities. It references Schedule 5 to the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000.
The circular announces an increase in the limits for FPI investment in Central Government Securities and State Development Loans (SDLs) for the next half-year, as outlined in the Medium Term Framework (MTF). The increases are scheduled in two tranches: October 3, 2016, and January 2, 2017.
Specifically, the limits for Central Government Securities will increase by INR 100 billion in each tranche. The limits for SDLs will increase by INR 35 billion in each tranche.
The revised limits are as follows (in INR Billion):
| | Central Government Securities | State Development Loans |
|-----------------------|------------------------------------|-----------------------------|
| | For All FPIs | For Long Term FPIs | Total | For All including Long Term FPIs |
| Existing Limits | 1440 | 560 | 2000 | 140 |
| Revised Limits from October 3, 2016 | 1480 | 620 | 2100 | 175 |
| Revised Limits from January 2, 2017 | 1520 | 680 | 2200 | 210 |
A separate communication will address the transfer of unutilized portions of the Long Term FPI category to the All FPIs category. All other existing conditions, including security-wise limits, permission for investment of coupons outside the limits, and the restriction to securities with a minimum residual maturity of three years, will remain in effect.
The Securities and Exchange Board of India (SEBI) will issue operational guidelines relating to the allocation and monitoring of these limits.
Authorised Dealer Category-I (AD Category-I) banks are instructed to bring the contents of this circular to the attention of their constituents and customers.
The directions in this circular are issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999.
For further information, contact the Financial Markets Regulation Department, Reserve Bank of India, Main Building, 2nd Floor, Shahid Bhagat Singh Road, Fort, Mumbai – 400001. Tel: 91-22-22603000, Fax: 91-22-22702290, email: cgmfmrdrbi.org.in. The Chief General Manager, T. Rabi Sankar, is the issuing authority. Website: www.rbi.org.in
Key Entities Referenced
Reserve Bank of India: The central bank of India, responsible for regulating the country's monetary policy and banking system. The circular is issued by RBI.
Foreign Portfolio Investors: Investors who invest in financial assets like stocks and bonds of a foreign country. The circular pertains to investments by FPIs in government securities.
Government Securities: Debt instruments issued by a government to support government spending. The circular discusses investment limits for FPIs in these securities.
Foreign Exchange Management Act, 1999: An Act of the Parliament of India to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India.
Securities and Exchange Board of India: The regulator of the securities market in India. SEBI is responsible for issuing operational guidelines related to the allocation and monitoring of investment limits.
Foreign Exchange Management Transfer or Issue of Security by a Person Resident outside India Regulations, 2000: Regulations pertaining to the transfer or issue of security by a person resident outside India.
Mumbai, Maharashtra: The city where the Financial Markets Regulation Department of RBI is located. Full address is given as Shahid Bhagat Singh Road, Fort, Mumbai 400001
State Development Loans: Debt instruments issued by State Governments in India to raise funds from the market. The circular discusses investment limits for FPIs in SDLs.
भारतीय �रज़व र् बक�
RESERVE BANK OF INDIA
www.rbi.org.in
RBI/2016-17/72
A.P. (DIR Series) Circular No. 4 September 30, 2016
To,
All Authorised Persons
Madam/Sir
Investment by Foreign Portfolio Investors (FPI) in Government Securities
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. The
limits for investment by foreign portfolio investors (FPI) in Government securities
were last increased in terms of the Medium Term Framework (MTF) announced
vide A.P. (DIR Series) Circular No. 55 dated March 29, 2016.
2. As announced in the MTF, the limits for investment by FPIs in Central
Government Securities for the next half year are proposed to be increased in two
tranches, each of Rs. 100 billion from October 3, 2016 and January 2, 2017
respectively.
3. As in the previous half-year, the limits for State Development Loans (SDLs) are
proposed to be increased in two tranches, each of Rs.35 billion, from October 3,
2016 and January 2, 2017 respectively.
�वत्तीय बाज़ार �व�नयमन �वभाग, मख्ु य भवन, दसू र� मंिज़ल, शह�द भगत �सहं माग,र् फोटर्, मुंबई – 400001.
फोन: (91-22) 22603000, फैक्स: (91-22) 22702290 ई-मेल: cgmfmrd@rbi.org.in
Financial Markets Regulation Department, Main Building,2nd Floor, Shahid Bhagat Singh Road, Fort, Mumbai – 400001.
Tel: (91-22) 22603000, Fax: (91-22) 22702290 e-mail- cgmfmrd@rbi.org.in: 2 :
4. The total increase in limits over the next two quarters would, accordingly, be as
under:
INR Billion
Central Government securities State Aggregate
Development
Loans
For All Additional Total For all FPIs
FPIs for Long (including
Term FPIs Long Term
FPIs)
Existing Limits 1440 560 2000 140 2140
Revised limits with effect 1480 620 2100 175 2275
from October 3, 2016
Revised limits with effect 1520 680 2200 210 2410
from January 2, 2017
5. As regards the transfer of unutilized portion of “Long Term FPI” category to “All
FPIs” category, a separate communication will follow.
6. 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 apply.
7. The operational guidelines relating to allocation and monitoring of limits will be
issued by the Securities and Exchange Board of India (SEBI).
8. AD Category – I banks may bring the contents of this circular to the notice of
their constituents and customers concerned.
9. 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.
Yours faithfully
(T. Rabi Sankar)
Chief General Manager