India eases up on government bond purchases by FIIs

Aimed at halting debilitating rupee fall.

The Securities and Exchange Board of India, the country's market regulator, said that foreign institutional investors (FIIs) can now buy government bonds without purchase permits from it until the overall investment reaches 90%.

The decision is now in effect. Foreigners' investment in government bonds is currently limited to US$25 billion.

SEBI said FII’s Qualified Financial Institutions will be permitted to invest in government debt without purchasing debt limits till the overall investment reaches 90%. The measure is expected to increase foreign direct investment into India.

Foreign investors were previously required to purchase permits from SEBI in monthly auctions for any investment in government bonds.

Each FII that wanted to invest in bonds was compelled to bid for a certain amount of the total up for auction. Investors were also required to pay a fee to participate in the auction.

SEBI previously relaxed rules for corporate debt purchase for FIIs, allowing them to freely buy up to 90% of the US$51 billion limit. To increase investments beyond the 90% cap, investors have to buy permits from SEBI.