SEBI streamlines FII debt limit process

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In a circular on 6 February 2009, the Securities and Exchange Board of India (SEBI) introduced an open bidding process to allocate a cumulative debt investment limit of US$15 billion for foreign institutional investors (FII)s in corporate debt. On 26 November the following year, SEBI increased the corporate debt limit to US$20 billion and the government debt limit to US$15 billion.

SEBI has now streamlined the debt limits allocation process through a circular on 27 April. It has provided greater certainty with regard to the timing of the auction, and has laid down a framework that is likely to prevent concentration of debt limits in the hands of a few FIIs.

Timing of auction

The April circular states that the auction will be conducted on the 20th of every month, if the free limit in any category (government debt old, government debt long-term, corporate debt old, and corporate debt long-term infra with one year lock-in and one year residual maturity clause) exceeds ₹10 billion (US$180 million).

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The legislative and regulatory update is compiled by Nishith Desai Associates, a Mumbai-based law firm. The authors can be contacted at nishith@nishithdesai.com. Readers should not act on the basis of this information without seeking professional legal advice.

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