Will Union Budget 2011 reinstate FII flows to India?
The existing limit of USD 5 billion for investment by Foreign Institutional investors (FIIs) in corporate bonds issued by companies in the infrastructure sector with a residual maturity of over five years, are proposed to be enhanced by an additional limit of USD 20 billion.
February 28, 2011 / 20:10 IST
By Suresh Swamy - Executive Director and Vijayashree R - Senior Manager, PwC India
With the objective of boosting further foreign investments into the country, especially in the infrastructure sector, the existing limit of USD 5 billion for investment by foreign Institutional investors (FIIs) in corporate bonds issued by companies in the infrastructure sector with a residual maturity of over five years, are proposed to be enhanced by an additional limit of USD 20 billion taking the total limit to USD 25 billion. The existing limit of USD 15 billion for investment in corporate bonds in other cases, is to continue. FII investments are currently restricted to investments in only listed debt securities of companies and in primary debt issues only if the listing is committed to be done within 15 days.It is now proposed to permit FIIs to invest in unlisted bonds issued by companies in the infrastructure sector that are generally organised in the form of special purpose vehicles, with a minimum lock-in period of three years. The FIIs will however be allowed to trade amongst themselves during the lock-in period. The surcharge on corporate FIIs has reduced from existing 2.5% to 2%. Even though FIIs are permitted to invest in SEBI registered mutual funds, it appears to be an expensive investment avenue (other than equity oriented funds), considering a higher distribution tax payable. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
