Of FIIs and infra bonds....

The Reserve Bank of India (RBI) on Friday allowed foreign institutional investors(FIIs)to invest in infrastructure bonds with a maximum limit of $25 billion, including in those issued by unlisted companies. Earlier, on March 31, Sebi, too, had allowed FIIs to invest in these bonds and had given them a limited trading window within which these entities were allowed to trade these bonds among themselves. The move by the central bank is expected to pave the way for foreign funds to be invested in the country’s infrastructure sector that is estimated to need over $500 billion over the next few years. In this year’s budget, the finance minister had proposed to raise FII investment limit in infra bonds issued by corporates. “It has now been decided, in consultation with the government, to enhance the FII investment limit in listed non-convertible debentures/ bonds, with a residual maturity of five years and above, and issued by Indian companies in the infrastructure sector, where ‘infrastructure’ is defined in terms of the extant ECB guidelines, by an additional limit of $20 billion taking this limit from $5 billion to $25 billion,” an RBI notification said. RBI also said that FIIs would be allowed to invest in such listed non-convertible debentures or bonds that have a minimum lock-in period of three years. However, as notified earlier,FIIs are allowed to trade in these instruments only among themselves during the lock-in period and cannot be transferred to any other types of investors. The central bank further said “it has also been decided to allow Sebi-registered FIIs to invest in unlisted non-convertible debentures/bonds issued by corporates in the infrastructure sector, provided that such investment is as per the (prescribed rules and regulations).”