RBI allows FIIs to invest upto $5 bn in credit enhanced bonds

MUMBAI: In a bid to attract capital inflows, the RBI today allowed SEBI-registered foreign institutional investors ( FIIs) and qualified foreign investors (QFIs) to invest in the credit enhanced bonds up to a limit of $ 5 billion.

These investments would be within the overall limit of $ 51 billion earmarked for corporate debt, RBI said.

The opportunity has been also been extended to long term investors registered with SEBI - Sovereign Wealth Funds (SWFs), Multilateral Agencies, Pension/ Insurance/ Endowment Funds, Foreign Central Banks, the RBI said.

The present limits for investments by FIIs, QFIs and long term investors registered with SEBI in Government securities is $ 30 billion.

Capital inflows help the rupee gain against US dollar. The local currency today slipped to nearly two-month low level closing of 63.24, down 77 paise, against the dollar.

It started weakening since last week after the dollar purchase by oil companies was partly shifted to the market.

FIIs have pulled out Rs 2,916 crore from debt securities so far this month. They have withdrawn Rs 53,070 crore from the debt market since the beginning of year, shows Sebi data.

In June, the RBI said credit enhancement can be provided by eligible non-resident entities to the domestic debt raised through issue of INR bonds/ debentures by all borrowers eligible to raise ECB under the automatic route.

It was then also decided to reduce the minimum average maturity of the underlying debt instruments from seven years to three years, as per a RBI circular.