RBI has removed a FEMA regulation which binds FIIs to restrict their investment in the Indian capital market in the ratio of 70:30 between equity and debt. The latest decision is in accordance with SEBI's new decision where the conditions limiting FIIs' allocation of funds between debt and equity to provide greater flexibility and investment options to overseas investors have been eased up.

 

An RBI notification said that the provision has been deleted from the existing FEMA regulations which restrict an FII's allocation of its total investment between equity and Debt in the ratio of 70:30. Market analysts have welcomed the decision for it has come in the wake of FIIs pulling out of the Indian equity market and pumping money in the debt market.

 

Earlier, SEBI got rid off with the existing limit on distribution of FII investment after the Government doubled the cap on their investment in corporate debt to six billion dollars. The new decision from SEBI is expected to offer greater flexibility in debt and equity market and more investment options to overseas investors.