RBI opposed to enhancing FII investment cap: Sources

The Reserve Bank of India (RBI) is against the finance ministry's proposal of creating a separate limit of USD 10 billion for qualified foreign investors (QFIs) investments in corporate bonds, reports CNBC-TV18. 

RBI sources told CNBC-TV18 that the central bank feels enhancing any limit would add to the strain of short-term debt. However, the finance ministry is keen to implement the 2012 budget proposal of allowing QFI investments in corporate bonds and has now mooted a USD 2 billion proposal.

Sources say the finance ministry has given RBI two options: raise the corporate bond limit by USD 1 billion to USD 21 billion, out of which USD 19 billion would be earmarked for FIIs and USD 2 billion for QFIs.

The second option is to carve out USD 2 billion for QFIs from the existing USD 25 billion FII limit for long-term infra bonds.