The Reserve Bank of India (RBI) has said that it would increase foreign portfolio investment limit in central government bonds from 5% to 5.5% for 2018-19 in Indian corporate and government debt, as per a notification on its website. The limit would then be increased to 6% of the outstanding stock in 2019-20.
The limit for FPI investment in state development loans remains unchanged at 2%.
Overall limit is fixed at 9% of the outstanding stocks. It will increase the FPI limit in corporate bonds to Rs 2.66 lakh crore from the current Rs 2.44 lakh crores in the first half of the fiscal year 2018-19 and raised to Rs 2.89 lakh crores in the second half.
The government seeks to borrow more than Rs 6 lakh crores from the markets in the first half.
The foreign investment road-map for foreign investment was last announced in September 2015 when FPI were allowed to hold 5% of central government bonds in stages. The limit is now exhausted.
According to the data available on NSDL, the general category of foreign investors currently holds Rs 1.91 lakh crores of central government bonds, completely exhausting the limit of the category. Long-term investors, such as sovereign wealth funds and pension funds have a separate quota which has some limit left.