The Securities and Exchange Board of India announces in its circular on Aug 26 that Non-Banking Financial Companies (NBFCs) categorized as Infrastructure Finance Companies (IFCs) by the Reserve Bank of India (RBI) are now eligible issuers for long term Foreign Institutional Investor (FII) corporate debt in the sector. Long term here refers to those corporate bonds with residual maturity of over 5 years. As SEBI has already increased FII investment limitss for longer term infra sector corporate bonds in November 2010 and March 2011, the August announcement seems to represent a further step to stimulate foreign investment, in attempt to empower sustainable economic growth nationally.
According to the master circular of External Commercial Borrowings (ECB), a greater Indian scheme in providing the principal dedicated in part to provide its much needed infrastructural growth, “infrastructure” sector was defined to encompass mostly those operations engaged in utilities, transportation and some commodities. The new inclusion of NBFCs last Friday generally refers to those non-bank companies which engage in the business of loans and advances and the acquisition of certain government and local authority issues.
When observing developments in infra category FII as demonstrated in the Nov 2010, March 2011 and the Aug 26 circulars, it seems like SEBI has been trying to ease up regulatory oversight in FII investment in Indian infrastructures. Institutional investors may as well consider taking advantage of SEBI’s friendlier attitude towards FII investments to explore burgeoning investment possibilities.
The Aug 26 announcement can be found here.
The March 2011 announcement can be found here.
The November 26 2010 announcement can be found here.
External Commercial Borrowing definition on “infrastructure” can be found here on p.15 under "v) End Use, section a)".
Please see answer 1 of question 1 here on the definition on Non-Banking Financial Companies
 Reserve Bank of India, FAQ of Non-Banking Financial Companies http://www.rbi.org.in/scripts/FAQView.aspx?Id=71