RBI raises FPI limit

BE/RBI  NOTE/13/2018

Reserve Bank of India, pronounced an increase in the FPIs limits (Foreign Portfolio Investment Limits), for buying Indian Government and Corporate bonds, which possibly would increase the demand for securities and a fall in the bond yields.

This move was taken by RBI in consultation with the Government after the expiry of the old framework.  The details of the announcement are:

1. The limit for FPIs to buy central Government securities will be raised to 5.5% of outstanding stock of securities in 2018-19 and 6% of the outstanding stock of securities in 2019-20.
2. Thus, the Government bonds under the General Category the revised limits will be Rs. 2.07 trillion for the first half of fiscal year 2019 and Rs. 2.23 trillion for the second half. Currently the limit is Rs. 1.91 trillion.
3. Long term category limits also stand revised, which now includes central banks, sovereign wealth funds and multilateral agencies, wherein the limits for first half of 2018-19 would be Rs. 78,700 crore and for the second half the same will be Rs. 65,100 crore.
4. The total limit for FPIs to buy bonds of Central Government, State Development loans and Corporate Bonds stands revised to Rs. 5.95 trillion for April-September from the current limit of Rs. 5.46 trillion and to Rs. 6.5 trillion for the second half of 2018-19.

Note:   Foreign Portfolio Investment (FPI) is investment by non-residents in Indian securities including shares, government bonds, corporate bonds, convertible securities, infrastructure securities etc.  The class of investors who make investment in these securities are known as Foreign Portfolio Investors.