The Securities and Exchange Board of India (SEBI) has allowed foreign institutional investors (FIIs) and qualified foreign investors (QFIs) to get directly in the debt market, by doing way with the auction process, in a bid to boost foreign fund flows to the capital market.
Accordingly, FIIs/QFIs shall hereafter be permitted to invest in Government Debt without purchasing debt limits till the overall investment reaches 90%.
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Once this 90% limit is reached, auction mechanism shall be initiated for allocation of the remaining limits, as currently in place for FII investments in Corporate Debt. Currently FIIs/QFIs have to purchase the debt limits through the auction mechanism.
The auction mechanism will be triggered only after investments in government securities by these foreign funds reach 90% of their debt investment limits.
The new rules will be in force with immediate effect and will not apply to debt auctioned on 20 August where FIIs have not utilised the auctioned debt limits.
These rules are part of the efforts to reverse outflows of foreign funds from the capital market and prop up the rupee, which has lost nearly 20% of its value against the US dollar.
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By GlobalData"The facility of re-investment as well as the restrictions on re-investment shall no longer apply in respect of limits held / investments made by FIIs in the government debt category, till the limits are available on tap," SEBI said.
SEBI has detailed KYC (Know Your Customer) requirements of eligible foreign investors investing through portfolio investment scheme (PIS) route through a circular issued on 12 September 2013.
