Finance Ministry favours FII investment limit for bonds in rupee terms

The Finance Ministry is in favour of fixing FII investment limit for government bonds in rupee terms instead of dollar as it would provide more headroom for investments by foreign investors.

Currently, the investment limit for G-sec by FIIs is US $30 billion annually. Out of the US $30 billion, FIIs are allowed to invest US $25 billion, whereas US $5 billion is for long-term investors.

"Finance Ministry favours setting FII limit in government bonds in rupee terms," Finance Secretary Rajiv Mehrishi told reporters here today.

Earlier, the Reserve Bank of India had suggested the Ministry to set Foreign Institutional Investors (FIIs) limits for investment in government securities in domestic currency.

The calculation in rupee term would provide higher headroom for investment and result in greater inflow of foreign currency.

The RBI and the government has been trying to attract foreign investment. This is also necessary to keep the rupee stable against dollar.

Rupee has been depreciating against dollar for past few weeks. On Friday it fell by two paise to 63.64 per dollar.

The country's foreign exchange reserves rose by US $1.57 billion to US $354.29 billion for the week ended June 12.

The overall reserves rose by US $239.4 million to US $352.713 billion in the previous reporting week.