CIRCULAR,
CIR/IMD/FIIC/ 19 /2013 dated November 28, 2013
To
All Foreign
Institutional Investors
through their
designated Custodians of Securities
The Managing
Directors
NSDL and CDSL
1. On September 10, 2012, Government of
India decided to permit Foreign Institutional Investors (FIIs) to invest in
“Credit Enhanced INR Bonds” up to an equivalent of US$ 5 billion within the
overall Corporate Bond limit of US$ 51 billion. The Reserve Bank of India vide
circular RBI/13-14/368 dated November 11, 2013 had permitted FIIs and QFIs to invest
in the credit enhanced bonds, as per paragraph 3 and 4 of the RBI A.P. (DIR
Series) Circular No. 120 dated June 26, 2013, up to a limit of USD 5 billion
within the overall limit of USD 51 billion earmarked for corporate debt.
2. The depositories shall monitor FII/QFI
investments in credit enhanced bonds, so as to ensure that aggregate
investments by FIIs/QFIs in such bonds shall not be more than 90% of the US $ 5
billion limit i.e US $ 4.5 billion. The Custodian/QDP shall provide on a daily basis,
FII/QFI wise, ISIN wise and company wise buy/sell information and any other transaction
or any related information to their respective depositories on the same day i.e
the day on which the transaction was carried out, before the time stipulated by
the depositories.
3. The depositories shall jointly publish/
disseminate the aggregate investment of FIIs/QFIs in Credit Enhanced Bonds, to
public, on a daily basis.
4. When the aggregate investments of all
the FIIs/QFIs reaches 90% of the investment limit, notice informing the same
shall be published by the depositories on their websites and no fresh purchases
shall be allowed without prior approval of the depositories. The same shall be
informed by the depositories to the Custodians/QDPs and recognized stock
exchanges having nationwide terminals. The depositories shall also inform the
Custodians/QDPs and stock exchanges when aggregate investments of all the
FIIs/QFIs fall below 90% of the investment limits.
5. For fresh purchases by FIIs/QFIs after
the investment limit reaches 90%, prior approval of the depositories shall be
obtained. The FII/QFI shall make such request for prior approval to the
concerned depository through the Custodians/QDPs specifying therein the name of
the FII/QFI, PAN and other unique identification number relating to that
FII/QFI, by way of any mode of communication as specified by the depositories
in consultation with each other. The concerned depository shall provide the
details of prior approval requests received by it to the other depository.
6. After market hours, the depository
shall give approval to request for purchase on a first-come- first-served basis
in co-ordination with the other depository, based on time of receipt of the
prior approval requests by the depositories. The validity of the approval shall
be for the next two trading days.
7. In case the aggregate holding of the
FII/QFI exceeds overall investment limit, the depositories shall jointly notify
the respective Custodians/QDPs regarding the breach along with the names of the
FII/QFI due to whom the limits have been breached. For this purpose, the stock
exchanges shall provide the required information so as to enable the
depositories to identify the transaction details of the FII/QFI including the
name of FII/QFI, PAN and/ or other unique identification number relating to
that FII/QFI, purchase quantity and time or any other information as may be
required by the depositories.
8. In case the aggregate holding of the
FII/QFIs exceeds overall investment limit for whatsoever reason, the FII/QFI
due to whom the limit is breached shall mandatorily divest excess holdings
within seven working days of such breach being notified by depositories to the
DP. The Custodians/QDPs shall obtain necessary authorization from the FII/QFI
at the time of account opening for such divestment of excess holdings.
This circular is
issued in exercise of powers conferred under 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.
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