Govt relaxes FII rules in long-term infra bonds

India has relaxed rules for foreign institutional investments in long-term infrastructure corporate bonds to attract more foreign funds into the sector, a finance ministry statement said on Monday.

In its budget in February, the government raised by an additional $20 billion, to $25 billion, the limit on foreign institutional investment in corporate bonds of duration longer than five years issued by infrastructure companies, with a minimum lock-in period of three years.

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Foreign institutional investors (FIIs) can now buy up to $5 billion in long-term infra bonds which have an initial maturity of five years or more at the time of issue with a residual maturity of one year at the time of first purchase by such investors, with a lock-in period of one year.

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FIIs can trade amongst themselves but cannot sell to domestic investors during the lock-in period of one year.

In August, Qualified foreign investors, or QFIs, were allowed to buy $3 billion of debt funds that invest in at least 5-year infrastructure-related debt, the country’s capital market regulator, Securities and Exchange Board of India (SEBI) said.

The remaining $17 billion limit will be available to FIIs for investing in long-term infra bonds which have an initial maturity of five years or more at the time of issue and residual maturity of three years at the time of first purchase by FIIs, with a lock-in period of three years, the statement said.

India’s capital markets regulator is expected notify the changed norms by October 15, the statement said.

Reuters