The Reserve Bank of India (RBI) on Thursday raised the investment limits for foreign portfolio investors (FPIs) for the October-December quarter by Rs 8,000 crore in central government securities and Rs 62,000 crore in state development loans. The revised limits will be effective from October 3, 2017, the central bank said in a notification. “This hike in cap is expected to result in more foreign fund flows to India,” it said.

This makes the total investment limit for foreign portfolio investors (FPI) in government securities for the October to December quarter higher by Rs 14,200 crore to Rs 2,89,300 crore from the existing limit at Rs 2,75,100 crore. “The total utilisation level of Indian debt by FPIs is very high in G-secs. So, relaxing the limits would provide an opportunity for FPIs to pickup more Indian debt. The yields are still attractive and so we expect the new investment limits to get exhausted quickly. This would lead to more FPIs flows into India,” said Karthik Srinivasan, group head, financial sector ratings, Icra.

G Ananth Narayan, head of global markets, Standard Chartered Bank, said, “This is expected and is as per the schedule released by the central bank on July 3. The new limits along with Rs 440 billion of limits allocated under the rupee denominated masala bonds will bring more dollar inflows into the country and is positive.” Sebi will issue the operational guidelines relating to allocation and monitoring of limits.

According to NSDL data available for the debt utilisation status of FPIs as on September 21, the total investment in the government debt category reached Rs 1,84,914 crore, 99.40 percent of the total permitted upper limit of Rs 1,87,700 crore during the September quarter. In case of state development loans, FPIs had invested Rs 4,095 crore of Rs 28500 crore utilising 14.37 per cent.

The revised limits as on December 2017 to invest in central government securities would be increased from Rs 2,42,000 crore to Rs 2,50,000 crore, including for all categories and for long-term FPIs. In state development loans, the FPIs can now invest up to Rs 39,300 crore (Rs 30,000 crore general and Rs 9300 crore for long term) as against earlier limit of Rs 28,500 crore.

Last week, the RBI removed masala bonds (rupee-denominated bonds) from the corporate debt limit to allow increase in investments by FPIs. This allows foreign investors to invest an additional Rs 44,001 crore in corporate bonds over the next two quarters (Rs 27,000 crore for the Oct-Dec quarter and Rs 17,001 crore for Jan-Mar quarter).