Government Securities and Corporate Debt
Abstract:Major initiatives have been taken by the Government to improve the investment in the government securities and corporate debt. Special benefits have been extended to NRIs in this respect.
An Overview of Investment in Government Securities and Corporate Debt-Commercial banks and insurance companies have been the major holders of investments in government securities.
But with the advent of mutual funds and non-banking finance companies in the last few years, a plethora of options have been opened up for the investors to explore.
Furthermore, the investment patterns in government securities also include, Gilt mutual funds, which boosted the base of retail investors. A 'Scheme of Non Competitive Bidding' was formulated for the small and medium sized investors to take part in Government Securities. Investments in government securities and corporate debt are considered as instruments of capital account management. A safe and secured settlement system is ensured through a more liberalized access to the foreign investment patterns.
Investment in Government Securities and Corporate Debt by Non-resident Indians-The Non-resident Indians and the Foreign Institutional Investors are privileged to buy Government Securities and Treasury bills under the norms and regulations of FEMA. Some of the benefits that the NRIs are entitled are:
- Non-resident Indians are privileged to buy government securities or treasury bills or units of local mutual funds
- An NRI can also buy shares in Public Sector organizations which are not regulated by the Government of India
- NRIs also enjoy the right to buy bonds issued by public sector undertakings (PSUs) in India
- The NRIs are also entitled to make investments in the government securities, units of domestic mutual funds, treasury bills, units of Money Market Mutual Funds in India, or National Plan/Savings Certificates on a non-repatriation basis
Investment in Government Securities and Corporate Debt by Foreign Institutional Investors-
- A SEBI registered Foreign Institutional Investor is entitled to buy Government securities or treasury bills, non-convertible debentures or bonds issued by an Indian firm as well as units of domestic mutual funds on a repatriation basis
- While buying the above mentioned securities, the total share of foreign institutional investors cannot surpass the ratio of 70:30
- The Foreign Institutional Investors should be entitled to 100 percent debt to enjoy a decent investment on the government securities and corporate debts
- The investment amount of FII in government securities is USD 3.2 billion whereas that of corporate debts is USD 1.5 billion