The Securities and Exchange Board of India (SEBI) raised the investment limits for foreign investors in government debt by USD 5 billion to USD 30 billion, but only long-term funds will be able to buy into that increased limit, according to a statement late on Wednesday.
The measures come as foreign funds have pulled out over USD 3 billion from the debt market in the past two weeks, contributing to a fall in the rupee to record lows.
SEBI said foreign institutional investors, which are registered as sovereign wealth funds, along with multilateral agencies, endowment, insurance and pension funds, and central banks will be able to buy into the USD 5 billion increased limit.
SEBI also said it would make available government debt on a first come, first serve basis, as opposed to the monthly auction system currently in place.
Furthermore, SEBI said FIIs who have already exhausted their investment limit will have a one-time opportunity to increase their debt investments by USD 250 million, as long as the overall foreign holdings don't surpass USD 25 billion.
Any FII who increases their investment limit will also have a lock-in period of 90 days.
India has been easing investment rules for foreign investors, moving away from a previously complicated system of categories limiting the debt that different set of investors could buy.