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RBI Announced FPIs Investment Limits in G-secs, SDLs for FY22 at 6%, 2%

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RBI announces FPI investment limits in G-secs and SDLsOn May 31,2021, Under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999), the Reserve Bank of India(RBI) had fixed the limits for Foreign Portfolio Investors’ (FPI) investment in Government securities (G-secs) and State Development Loans (SDLs) unchanged at 6 percent and 2 percent respectively, of outstanding stocks of securities for FY22.

Other Investment Limits:

i.The allocation of incremental changes in the G-sec limit (in absolute terms) over the two sub-categories – ‘General’ and ‘Long-term’ – also retained by RBI at 50:50 for FY22.

ii.RBI has added the entire increase in limits for SDLs (in absolute terms) to the ‘General’ sub-category of SDLs.

iii.The current FPI limit: As of March 31, 2021, the FPI limit in G-Sec General, G-Sec Long Term, SDL General, SDL Long Term, and Corporate Bonds, remains at Rs 9,54,280 crore.

iv.Revised FPI investment limit in the debt instruments for H1 FY22 (April 2021- September 2021) and H2 FY22 (October 2021-March 2022) was at Rs 10,14,957 crore and Rs 10,75,637 crore.

Recent Related News:

On April 8, 2021, The Reserve Bank of India (RBI) announced its first purchase of G-secs for an amount of Rs 25,000 crore under the G-sec Acquisition Programme (G-SAP 1.0), the purchase was planned to be held on April 15, 2021.

About Foreign portfolio investment (FPI):

It is investments that consist of securities and other financial assets held by investors in another country. It does not provide the investor with direct ownership of a company’s assets.

About Government securities(G-secs):

i.A Government Security (G-Sec) is a tradeable instrument issued by the Central Government or the State Governments. It acknowledges the Government’s debt obligation. Such securities are short term (usually called treasury bills, with original maturities of less than one year) or long term (usually called Government bonds or dated securities with original maturity of one year or more).

  • In India, the Central Government issues both, treasury bills and bonds or dated securities while the State Governments issue only bonds or dated securities, which are called the State Development Loans (SDLs). G-Secs carry practically no risk of default and, hence, are called risk-free gilt-edged instruments.