Economy
RBI hikes FII limit in government securities to $25 billion

With increase of $5 billion in each of the two categories, FIIs and long-term investors can now invest $25 billion in G-Secs and $50 billion in corporate debt instruments, taking the total to $75 billion

Mumbai: The Reserve Bank of India (RBI) has hiked foreign institutional investors (FII) investment limits in government securities (G-Secs) and corporate bonds by $5 billion each, taking the total cap in domestic debt to $75 billion, with a view to bridging the current account deficit, reports PTI.

 

Further liberalising the norms, the three-year lock-in period for FIIs purchasing government securities (G-Secs) for the first time has been done away with, RBI said.

 

The sub-limit of $10 billion for investment by FIIs and long-term investors in G-Secs stands enhanced by $5 billion, it said.

 

The limit in corporate debt, other than infrastructure sector, stands enhanced from $20 billion to $25 billion, RBI said.

 

With increase of $5 billion in each of the two categories, FIIs and long-term investors can now invest $25 billion in G-Secs and $50 billion in corporate debt instruments, taking the total to $75 billion.

 

The earlier FII investment limit in G-Secs was $20 billion and for corporate debt it was $45 billion, including sub-limit of $25 billion for infra bonds.

 

RBI further said: "Residual maturity condition shall not be applicable for the entire sub-limit (in GSecs)of $15 billion but such investments will not be allowed in short-term paper like Treasury Bills, as hitherto".

 

The overall FII limit of domestic debt is distributed through a host of categories across government, corporate and infrastructure debt.

 

Long-term investors include sovereign wealth funds, multilateral agencies, pension funds and foreign central banks.

 

Government, which is battling a high current account deficit (CAD) -- the gap between inflows and outflows of foreign funds -- is trying to attract more foreign funds into the country.

 

The CAD touched a record high of 5.4% in the July-September quarter of the current fiscal.

 

In order to check outflow of foreign currency, the government recently hiked import duty on gold and also took steps to encourage mutual funds park their gold in deposit schemes offered by banks.

 

As a measure of further relaxation, the RBI added that it has dispensed with the one year lock-in period on holding infrastructure bonds.

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Suzlon Energy gets lenders nod for Rs9,500 crore CDR plan

The CDR proposal involves a 10-year door-to-door back-ended repayment plan with a reduced interest rate, which effectively means a 3% savings on interest burden for financially troubled Suzlon

Mumbai: Wind energy major Suzlon said its lenders, comprising 19 banks led by State Bank of India (SBI), have approved its proposal to rejig Rs9,500 crore of domestic debt, providing a big relief to financially troubled company, reports PTI.

 

“The empowered group of corporate debt restructuring (CDR) cell comprising 19 lenders formally approved our CDR proposal to recast Rs9,500 crore of domestic debt. The package is effective from 1 October 2012 and does not include our foreign currency debt,” Suzlon said in a statement.

 

The Tulsi Tanti-promoted company further said, the CDR proposal involves a 10-year door-to-door back-ended repayment plan with a reduced interest rate, which effectively means a 3% savings on interest burden for the company.

 

The proposal also involves a two-year moratorium on principal and term-debt interest payments, apart from a fresh working capital loan of Rs1,800 crore, which will have a six-months interest moratorium, which is aimed at helping the company accelerate execution of its strong order book.

 

During the course of the two-year moratorium, interest worth Rs1,500 crore will be converted into equity, the company said.

 

The Pune-headquartered company further said that the package also includes promoters bringing in Rs250 crore of fresh equity, of which Rs62 crore was infused last December.

 

“This approval clearly underscores the fundamental viability of our business,” Kirti Vagadia, chief financial officer of the Suzlon Group.

 

SBI is the consortium leader and the CDR plan has been drafted by SBI Caps. SBI has a Rs3,500-crore exposure to the company.

 

Suzlon was looking at recasting Rs11,000 crore of its Rs14,568 crore domestic loans (as of the September quarter).

 

This debt is four times its equity. It sought the debt restructuring process during late October.

 

The other main lenders include IDBI Bank, Bank of Baroda, Axis Bank, Punjab National Bank, Indian Overseas Bank, Central Bank of India, Yes Bank, and State Bank of Bikaner & Jaipur, among others.

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Competition Commission gives its consent to Kotak-Barclays deal

CCI said the proposed combination is not likely to have an appreciable adverse effect on competition in India as the size of the business instalment loans portfolio of Barclays in India is relatively insignificant

New Delhi: Fair trade regulator Competition Commission of India (CCI) has approved Kotak Mahindra Bank’s proposal to acquire Barclays Bank’s unsecured loan business in India, saying the deal would not have any adverse impact on competition, reports PTI.

 

The proposed transaction involves Kotak’s acquisition of business instalment loans portfolio of Barclays India and Barclays Investments and Loans (India).

 

Business instalment loans are provided by Barclays to individuals, sole proprietorships, partnership firms and companies for business needs or working capital requirements.

 

In its order dated 22nd January, CCI noted that “the proposed combination is not likely to have an appreciable adverse effect on competition in India”.

 

The regulator observed that the size of the business instalment loans portfolio of Barclays in India “is relatively insignificant”.

 

“There are also other players in the Indian banking and financial services sector providing similar loans,” CCI said.

 

“In view of the foregoing, it is observed that the proposed combination is not likely to give rise to any adverse competition concern in India,” it added.

 

Barclays and Kotak had reached an agreement on the proposed deal in December last year. Following this the entities had approached CCI for approval on 2 January 2013.

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