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Mumbai: In a bid to
prop up the battered currency, the Reserve Bank of India (RBI)
Monday hiked the limit of overseas investments in government and
corporate bonds and announced a slew of other measures to improve
market sentiments. The limit of overseas investment in government
bonds has been raised by $5 billion to $20 billion and that of
external commercial borrowings to $10 billion.
The measures are aimed at attracting more foreign investments that
would help revive the battered currency, which hit a record low of
57.33 to the dollar last week.
The Reserve Bank of India said in a statement that it has taken
measures in consultation with the government of India.
Finance Minister Pranab Mukherjee had said earlier in the day that
Economic Affairs Secretary R. Gopalan was in talks with the RBI
for coordinated steps to bolster economic growth and revive the
currency.
It has been decided to allow Indian companies in the manufacturing
and infrastructure sector with foreign exchange earnings to avail
of external commercial borrowing (ECB) for repayment of
outstanding rupee loans towards capital expenditure and/or fresh
rupee capital expenditure under the approval route, the RBI said.
"The overall ceiling for such ECBs would be $10 billion," the
central bank said.
The existing limit for investment by Securities and Exchange Board
of India (SEBI) registered foreign institutional investors (FIIs)
in government securities (G-Secs) has been enhanced by a further
amount of $5 billion.
This would take the overall limit for FII investment in G-Secs
from $15 billion to $20 billion.
"In order to broad base the non-resident investor base for G-Secs,
it has also been decided to allow long term investors like
Sovereign Wealth Funds (SWFs), multilateral agencies, endowment
funds, insurance funds, pension funds and foreign central banks to
be registered with SEBI, to also invest in G-Secs for the entire
limit of $20 billion," the RBI said.
The sub-limit of $10 billion (existing $5 billion with residual
maturity of 5 years and additional limit of $5 billion) would have
the residual maturity of three years.
The RBI said Qualified Foreign Investors (QFIs) can now invest in
those mutual fund schemes that hold at least 25 percent of their
assets, either in debt or in equity or both, in infrastructure
sector under the current $3 billion sub-limit for investment in
mutual funds related to infrastructure.
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