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RBI permits FPIs to invest in treasury bills

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.

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