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July 2011

A.P. (DIR Series) Circular No. 55, dated 29- 4-2011 —Foreign Investments in India by SEBI-registered FIIs in other securities.

By Gaurang Gandhi, Chartered Accountant
Reading Time 2 mins
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Presently, FII can investment up to US $ 15 billion in corporate debt and an additional US $ 5 billion in bonds with a residual maturity of over five years, issued by Indian companies which are in the infrastructure sector, where ‘infrastructure’ is defined in terms of the extant guidelines on External Commercial Borrowings (ECB).

This Circular has increased the FII investment limit in listed non-convertible debentures/bonds, with a residual maturity of five years and above, and issued by Indian companies in the infrastructure sector, where ‘infrastructure’ is defined in terms of the extant ECB guidelines, by an additional limit of US $ 20 billion i.e., from the existing limit of US $ 5 billion to US $ 25 billion. As a result, the total limit available to FII for investment in listed non-convertible debentures/bonds would be US $ 40 billion with a sub-limit of US $ 25 billion for investment in listed non-convertible debentures/ bonds issued by corporates in the infrastructure sector. This investment by FII in listed non-convertible debentures/bonds would have a minimum lock-in period of three years. However, FIIs are allowed to trade amongst themselves during the lock-in period.

Further, it has also been decided to allow SEBI registered FII to invest in unlisted non-convertible debentures/bonds issued by corporates in the infrastructure sector, subject to the terms and conditions mentioned above.

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