In a bid to encourage investments by long-term foreign portfolio investors (FPIs), the Reserve Bank of India on Monday said whenever there is an increase in FPI investment limit in central government securities (G-Secs) in the future, they will be allocated 75 per cent of the limit as against 60 per cent now.

Consequent to the increase in the limit for FPI investment in G-Secs in favour of long-term investors, the allocation for FPIs in the ‘general’ category goes down from 40 per cent to 25 per cent.

Further, the central bank has done away with the practice of transferring unutilised limits of ‘long-term’ category to ‘general’ category of FPIs.

To harmonise the approach to FPI investments in State Development Loans (SDLs) with that for G-Secs, future increases in SDLs would be in the ratio of 75 per cent for ‘long term’ category and 25 per cent for ‘general’ category of FPIs.

The RBI said the overall cap of 5 per cent (of outstanding stock) for G-Secs and 2 per cent (of outstanding stock) for SDLs remain unchanged.

Limit raised

Meanwhile, the limits for investment by FPIs in G-Secs and SDLs for the quarter July-September 2017 have been increased by ₹11,000 crore and ₹6,100 crore, respectively. The new FPI limit for G-Secs and SDLs are ₹2.42 lakh crore and ₹2.75 lakh crore, respectively.

For government securities, the revised FPI limits, which are effective from July 4, will be ₹1,87,700 crore (₹1,84,900 crore earlier) and ₹54,300 crore (₹46,100 crore) for general category and long-term investors, respectively.

For SDLs, the revised FPI limits, will be ₹28,500 crore (₹27,000 crore) and ₹4,600 crore (nil) for general category and long-term investors, respectively.

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, the RBI said.

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