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Informist, Wednesday, Jul 31, 2024

 

--Fin secy: Won't exclude more bonds under FAR in foreseeable future

 

By Kabir Sharma and Kshipra Petkar

 

MUMBAI – There is no plan to exclude any more gilts from the fully accessible route in the foreseeable future, Finance Secretary T.V. Somanathan said today. "Don't plan to exclude or include any bonds under the fully accessible route in the foreseeable future," Somanathan said on the sidelines at an event organised by Business Standard.

 

The Reserve Bank of India on Monday notified that new issuances of 14-year and 30-year government bonds will no longer be eligible under the fully accessible route, which has no limits for investment by foreign portfolio investors. Full accessibility was a key factor that enabled the inclusion of Indian bonds in global bond indices as it facilitates ease of investment and trading.

 

Investment by foreign portfolio investors in new 14- and 30-year bonds can continue using the voluntary retention route and the medium-term framework for foreign investment, the RBI had said. Current norms for 2024-25 (Apr-Mar) allow FPIs to hold 6% of the total outstanding stock of government bonds.

 

JP Morgan added 29 gilts under the fully accessible route for inclusion in the Government Bond Index – Emerging Markets suite. The inclusion in this index will be staggered over 10 months till March. A similar exercise will start with Bloomberg's local currency emerging markets index from Jan 31. Since the inclusion was first announced in September, FPIs have bought around $13 bln worth of gilts under the fully accessible route. Analysts expect around $30 bln of inflows from index-related purchases alone in the current fiscal year.

 

The 14- and 30-year gilts which have already been notified under the fully accessible route will remain without limits for foreign investment in the secondary market, the RBI notification had said. This is the first time the central bank has taken bonds of certain maturities out of the fully accessible route since it introduced the avenue for a handful of gilts in 2020. The 15-year bond, as well as the 40- and 50-year government securities, have not been added to the fully accessible route among gilts in the ongoing borrowing calendar. The government replaced the 14-year bond with the 15-year bond in its Apr-Sep borrowing calendar. 

 

FPI investment in new 14- and 30-year bonds can continue using the voluntary retention route and the medium-term framework for foreign investment, the RBI said.  End

 

Edited by Manisha Baxla

 

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