The Reserve Bank of India (RBI), allows foreign portfolio investors (FPI) to invest in shorter maturity Government bonds like treasury bills.

This is subject to the 20% overall limit for investments in government securities as well as corporate bonds of less than one year maturity. The RBI in a circular stated, “At any point in time, all securities with residual maturity of less than one year will be reckoned for the 20% limit, regardless of the maturity of the security at the time of purchase by the FPI.”

Further, if the investment is above 20%, the FPIs shall bring down the holding to below 20% within 6 months, starting from yesterday. Until then, FPIs are prohibited from buying bonds with less than at least 1 year maturity, either via fresh purchases or through roll down of investments with a current tenor of more than one year.

Read EquityPandit’s Technical Analysis of Nifty Bank Outlook for the Week