The government is likely to soon raise the investment limit for FIIs in corporate bonds and G-secs by $ 5 billion each, a move that will help the Centre raise funds through market borrowing programme without hurting availability of money for the private sector.
“We are planning to raise the investment limits for FIIs in corporate bonds and G-secs (government securities) soon,” a senior Finance Ministry official told PTI.
The limits in both corporate bonds and G-secs would be enhanced by $5 billion each, he added.
The FIIs, the official said, have almost exhausted the Rs 43,650 crore ($10 billion) investment limit for purchase of G-secs and they would not be able to buy more securities unless the ceiling is enhanced.
As per the latest data, the FIIs investment in G-secs stood at Rs 42,388 crore.G-secs comprise treasury bills and dated securities issued by the central and state governments.
According to the proposal, FII investment cap in corporate bonds is likely be raised from $15 billion at present to $20 billion.
For G-secs, the limit is expected to go up from $10 billion to $15 billion. The new limit, the official said, will have some relaxation in lock-in period and bond tenure norms.
The government in September revised its market borrowing programme for 2011-12 and decided to raise an additional Rs 52,800 crore.
Following the revision, the government will raise Rs 4.7 lakh crore from the market, up from Rs 4.37 lakh crore in the previous fiscal.
There are apprehensions that the increased government borrowing would reduce the credit availability for the private sector.
The government had earlier relaxed the norms for FII investment in long-term infrastructure bonds.