CIRCULAR, CIR/IMD/FIIC/6/2013, dated April 1, 2013
To
All
Foreign Institutional Investors
Through
their designated Custodians of Securities
1.
The Government of India has issued a Press Release dated March 23, 2013 wherein,
inter alia, the following measures have been proposed to simplify the framework
of FII debt limits:
a. Merger of existing debt limits
into following two broad categories:
i. Government securities of US$
25 billion ( by merging Government Debt – Old of US$ 10 billion and Government
Debt – Long Term of US$ 15 billion).
ii. Corporate bonds of US$ 51
billion (by merging US$ 1 billion for QFIs, US$ 25 billion for FIIs and US$ 25
billion for FIIs in long term infra bonds).
b. On account of the room created
by unifying the debt categories, the current SEBI auction mechanism of
allocating debt limits for corporate bonds, shall be replaced by the ‘on tap
system’ currently in place for infrastructure bonds.
2.
Accordingly, in partial modification of Para 4 of the SEBI circular
CIR/IMD/FIIC/3/2013 dated February 08, 2013, the categories of Government Debt
Old (US$ 10 billion) and Government Debt Long Term (US$ 15 billion) shall be
merged into a single category named 'Government Debt' and the combined limit shall
be US$ 25 billion, equivalent to INR 124,432 crores.
3.
Further, in partial modification to Para 4 of the SEBI circular
CIR/IMD/FIIC/3/2013 dated February 08, 2013, the following categories of debt
limits shall be merged into a single category named 'Corporate Debt':
a. Corporate Debt – Old for FIIs
(US$ 20 billion)
b. Corporate Debt – Old for QFIs
(US$ 1 billion)
c. Corporate Debt – Long Term
(US$ 5 billion)
d. Corporate Debt Long Term Infra
(US$ 12 billion)
e. QFI investment in debt mutual
fund schemes which invest in infra (US$ 3 billion)
f. Investment in IDF (US$ 10
billion)
The
combined limit for this 'Corporate Debt' category would be US$ 51 billion
equivalent to INR 244,323 crores
4.
The table summarizing the categories of debt investment limits is as follows:
|
S.
No.
|
Type of
Instrument
|
Cap
(US$ bn)
|
Cap
(INR Crore)
|
Eligible
Investors
|
Remarks
|
|
1
|
Government
Debt
|
25
|
124,432
|
FIIs
and QFIs
|
Eligible
investors may invest in Treasury Bills only up to US$ 5.5 billion within the
limit of US$ 25 billion
|
|
2
|
Corporate
Debt
|
51
|
244,323
|
FIIs
and QFIs
|
Eligible
investors may invest in Commercial Papers only up to US$ 3.5 billion within
the limit of US$ 51 billion
|
|
|
Total
|
76
|
368,755
|
|
|
5.
Vide circular CIR/IMD/FIIC/12/2012 dated April 27, 2012, SEBI had indicated
that the auction of debt limits would be conducted on 20th of every month (if
20th is holiday, auction shall be done on the next working day), based on
availability of free limits at the end of respective previous month. In partial
modification of the said circular, it has been decided that FIIs can now invest
in Corporate Debt without purchasing debt limits till the overall investment
reaches 90% after which the auction mechanism would be initiated for allocation
of the remaining limits, as currently in place for Corporate Debt Long Term
Infrastructure bonds.
6.
It is clarified that consequent to the changes as above, the facility of
re-investment provided vide SEBI circular CIR/IMD/FIIC/18/2010 dated November
26, 2010 as well as the restrictions on re-investment as given in the SEBI
circulars CIR/IMD/FIIC/1/2012 dated January 03, 2012, CIR/IMD/FIIC/22/2012
dated November 07, 2012 and CIR/IMD/FIIC/1/2013 dated January 01, 2013 shall no
longer apply in respect of limits held/investments made by FIIs in the
Corporate Debt category, till the limits are available on tap.
7.
It is further clarified that for those FIIs which had obtained Debt limits in
the debt limit auctions held on February 20, 2013 and on March 20, 2013, the
time period for utilization of Corporate Debt limits allocated through the bidding
process shall be 60 days, in terms of the SEBI circular CIR/IMD/FIIC/22/2012
dated November 07, 2012.
8.
The status of utilization of debt limits as on March 31, 2013 indicating the
quantum of limits which are freely available for investments by FIIs and QFIs
shall be put on the SEBI website and thereafter, the monitoring of investments
by FIIs and the dissemination of daily data shall be done by the depositories
in the same manner as is being done in the case of QFIs. For this purpose`s,
the mechanism laid down in Para 4 of the SEBI circular CIR/IMD/FII&C/
17/2012 dated July 18, 2012 shall apply mutatis mutandis. The custodians shall
provide the necessary data to the depositories on a daily basis for this
purpose. Accordingly, the present practice of dissemination of fortnightly debt
utilization status shall be discontinued.
This
circular shall come into effect immediately. This circular is issued in
exercise of powers conferred under SEBI Section 11 (1) of the Securities and
Exchange Board of India Act, 1992, to protect the interests of investors in
securities and to promote the development of, and to regulate the securities
market.
A
copy of this circular is available at the web page “F.I.I.” on our website www.sebi.gov.in.
The custodians are requested to bring the contents of this circular to the
notice of their FII clients.
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