‘FII cap for purchase of G-secs to be hiked’

The govt is likely to soon increase the purchase limit of government securities by the Foreign Institutional Investors (FIIs)

The government is likely to soon increase the purchase limit of government securities by the Foreign Institutional Investors (FIIs),a move that will help it meet the enhanced market borrowing target without hurting liquidity position in the system.

The FIIs,a Finance Ministry official said,has almost exhausted the Rs 43,650 crore (USD 10 billion) investment limit for purchase of G-secs and they would not be able to buy more securities unless the ceiling is enhanced.

As per the latest data,the FIIs investment in G-secs were at Rs 42,388 crore.

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“We could increase the limits for FIIs investment in G-secs soon as we need money,” a Finance Ministry official said without specifying the proposed limit.

G-secs comprise treasury bills and dated securities issued by the central and state governments.

The Government last month revised its market borrowing programme for 2011-12 and decided to raise an additional Rs 52,800 crore. Following the revision,the government will raise Rs 4.7 lakh crore from the market,up from Rs 4.37 lakh crore in the previous fiscal.

There are apprehensions that increased government borrowing would reduce the credit availability for the private sector.

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The government had earlier relaxed the norms for FII investment in long term infrastructure bonds.