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To incentivise long-term investors in government securities, the RBI has allowed reinvestment of coupons in G-Secs even when exiting limits are fully utilised.
As on date, the limit on investment in G-Secs is fully utilised, the RBI said. The investment limit in G-Secs for foreign portfolio investors (FPIs) is $30 billion of which $5 billion is reserved for long-term investors.
RBI has also decided to harmonise the minimum residual maturity requirement for future FPI investment in G-Secs and corporates at three years. Earlier, the three-year condition was applicable only to FPI investment in G-Secs. However, FPI investment in corporate bonds did not have any ceiling with regard to tenor.
This includes limits vacated when the current investment by an FPI runs off either through sale or redemption. Moreover, FPIs will not be allowed to invest incrementally in short maturity liquid/money market mutual fund schemes, RBI said. There will be no lock-in period and FPIs would be free to sell the securities (including those that are presently held with less than three-year residual maturity) to domestic investors.
Detailed operational guidelines will be issued by end-February, RBI said.
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