Previously, the limit remained unchanged if a foreign institutional investor reinvested the proceeds within five days.

However, the regulator on Tuesday completely shut this door for FIIs, declaring that such limits allocated to the investor would lapse either at the time of sale of the security or upon redemption.

'It has been decided that henceforth, re-investment period shall not be allowed for all new allocations of debt limits to foreign institutional investors/sub-accounts. Thus, the limits acquired in the bidding sessions henceforth shall expire/lapse on either sale or redemption at maturity of the debt investments,' SEBI said in a circular.

However, the regulator said, 'Fresh limits shall again be allocated in subsequent bidding processes.' It further said if an FII decides to exit its holdings in the long-term infrastructure fund category during the lock-in period, the limit shall automatically be transferred to the buyer of the instrument.

However, it added that if an investor decides to sell or redeem his holdings after the lock-in period, the limit shall expire or lapse.

On how FIIs/sub-accounts that currently hold limits/ investments will be treated, SEBI said the existing limits will expire if total sales made from the existing debt portfolio (current debt investment and the un-utilised limit

currently with the entity, if any) is twice the size of its debt portfolio as of on Tuesday, or upon expiry of two years from now (i.e. 2 January, 2014).

The regulator also clarified that FIIs/sub-accounts are not required to sell their debt holdings after they reach the threshold mentioned above and can continue to retain the debt investments beyond the threshold.

However, sale or redemption thereon will not be eligible for re-investment beyond this threshold.