FIIs may invest upto $5bn in credit enhanced bonds: RBI

In a bid to attract capital inflows, the RBI on Monday allowed Sebi-registered foreign institutional investors (FIIs) and qualified foreign investors (QFIs) to invest in the credit enhanced bonds up to a limit of USD 5 billion.

These investments would be within the overall limit of USD 51 billion earmarked for corporate debt, RBI said.

Also Read: Trade deficit 50% of Oct last year; good for Re: Dy RBI Guv

The opportunity has been also been extended to long term investors registered with Sebi - Sovereign Wealth Funds (SWFs), Multilateral Agencies, Pension/ Insurance/ Endowment Funds, Foreign Central Banks, the RBI said.

The present limits for investments by FIIs, QFIs and long term investors registered with Sebi in Government securities is USD 30 billion.

Capital inflows help the rupee gain against US dollar. The local currency today slipped to nearly two-month low level closing of 63.24, down 77 paise, against the dollar.

It started weakening since last week after the dollar purchase by oil companies was partly shifted to the market.

FIIs have pulled out Rs 2,916 crore from debt securities so far this month. They have withdrawn Rs 53,070 crore from the debt market since the beginning of year, shows Sebi data.

In June, the RBI said credit enhancement can be provided by eligible non-resident entities to the domestic debt raised through issue of INR bonds/ debentures by all borrowers eligible to raise ECB under the automatic route.

It was then also decided to reduce the minimum average maturity of the underlying debt instruments from seven years to three years, as per a RBI circular.