SEBI eases debt allocation mechanism for FIIs

Relaxing debt allocation norms for foreign institutional investors (FII), SEBI today allowed those overseas entities having acquired debt investment limits in the past one year to re-invest up to half of their maximum debt security holdings during 2013.

Also read: FIIs invest Rs 35k cr in debt mkt in 2012

The FIIs need to acquire investment limits in debt securities by bidding in a period auction conducted by SEBI. Earlier in November 2012, SEBI had allowed FIIs to re-invest 50 percent of their debt holdings from the previous calendar year to the succeeding calender year with effect from January 1, 2014.

In a part-modification of this circular, SEBI has now allowed certain FIIs to re-invest up to 50 percent of their maximum debt holdings at any point of time in 2013 itself. These FIIs would be those which purchased debt investment limits during the year 2012 and did not hold any debt investment limits prior to that.

"In order to provide operational flexibility to those FIIs/ sub-accounts which did not hold any debt investment limits as on January 03, 2012 and purchased debt investment limits thereafter, it has been decided that they shall be allowed a cumulative re-investment facility to the  extent of 50 percent of their maximum debt holding at any point of time during the calendar year 2013," SEBI said.

The re-investment facility would be available during each calendar year to those FIIs which hold debt investments as on December 31, 2012. It further noted that the re-investment facility for those FIIs having debt limit prior to the beginning of 2012, would remain available till December 31, 2013. The re-investment period of five working days for government debt and 15 working days for corporate debt would remain the same.

At the end of 2012, FII have invested around Rs 35,000 crore (USD 6.64 billion) in the debt market.