Seeking to narrow the current account deficit (CAD
), the Finance Ministry on Friday increased FII limits in government securities and corporate bonds by $5 billion each, taking the total investment limit in domestic debt to $75 billion.
"As far as FII (foreign institutional investors) debt limit is concerned, two new categories have been created. One $5 billion in government securities without any stipulated residual which will be open to pension fund, central banks, sovereign wealth funds. Other $5 billion will be open for corporate bond and gilt. So the overall limit goes up from $65 billion to $75 billion," Finance Ministry sources said.
The overall limit of domestic debt is distributed through a host of categories across government, corporate and infrastructure debt.
This would bring in additional long-term funds into India, he said, adding that the guidelines would be notified in 7-10 days by Reserve Bank.
The government, which is battling
a high current account deficit (CAD), is trying to attract more foreign funds into the country. The CAD, which is the gap between inflows and outflows of foreign funds, was a high of 4.5 per cent in the previous (2011-12) fiscal.
In the current fiscal the CAD is expected to ease to 3.5 per cent.
In order to contain CAD, the RBI has already imposed restrictions on financing of gold
purchases to curb speculations of the yellow metal.
Gold import during the first half of the fiscal amounted to $20 billion out of the total import of $233 billion.