The Reserve Bank of India on Friday unveiled a series of measures aimed at attracting greater foreign capital into India's debt market, easing investment norms for overseas investors and broadening access to government securities.
After announcing a status quo on repo rate, Governor Sanjay Malhotra shared the measures implemented by the MPC to enhance cpital inflows as the world struggles through a heightened energy crisis amid the ongoing conflict in West Asia.
In a significant move, the RBI said it is expanding the universe of government securities available under the Fully Accessible Route (FAR) by including all new issuances of 15-year, 30-year and 40-year government securities (G-Secs).
The Fully Accessible Route allows non-resident investors to invest in specified government bonds without being subject to investment caps.
The move is expected to increase the attractiveness of India's sovereign debt market, particularly among long-term global investors such as pension funds, insurance companies and sovereign wealth funds.
The central bank also announced the removal of several restrictions applicable to foreign portfolio investors (FPIs) investing in government securities.
Limits relating to short-term investments and investment concentration are being scrapped, giving overseas investors greater flexibility in deploying capital across India's bond market.
Market participants believe the relaxation could encourage larger and more diversified foreign participation in government debt, particularly at a time when investors are searching for stable emerging-market opportunities.
In another major boost for overseas participation, the government has removed taxes applicable to foreign investors purchasing government securities.
The tax relief is expected to improve post-tax returns for global investors and enhance the competitiveness of Indian government bonds relative to debt instruments offered by other emerging economies.
The move forms part of a broader strategy to deepen India's bond market and attract a larger share of global capital flows.
The announcements come as global investors navigate heightened geopolitical risks, fluctuating energy prices and changing monetary policy expectations across major economies.
India's inclusion in key global bond indices has already increased international interest in domestic government securities. Analysts believe the latest reforms could further accelerate foreign participation and improve liquidity in the sovereign debt market.
The measures are also expected to support government borrowing programmes by expanding the pool of potential investors at a time when financing requirements remain elevated.
The latest reforms underscore the central bank's efforts to make India's debt markets more accessible and globally competitive.
By expanding eligible securities, removing investment restrictions and supporting tax incentives, policymakers are aiming to position India as a more attractive destination for long-term foreign capital despite an increasingly uncertain global environment.
