The Reserve Bank of India has banned foreign institutional investors from buying short-term government securities - treasury bills, or T-Bills - to prevent interest rate-related volatility. It has also proposed to allow currency hedging for FIIs.
Investments by foreign portfolio investors in government securities will be permitted only in dated securities of residual maturity of one year and above, and existing investment in T-Bills will be allowed to taper off on maturity or sale, RBI said in its first bi-monthly monetary policy statement on Tuesday. FIIs have used 85% of the $5.5-billion limit allowed in T-Bills. RBI expects the investment limits vacated at the shorter end will be available at longer maturities.
Source : articles.economictimes.indiatimes.com
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