FPI holding of FAR gilts tops INR 3.5 tln, reclassified bonds add INR 119 bln
This story was originally published at 15:53 IST on 15 June 2026
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MUMBAI – Foreign portfolio investors' holdings of Indian government bonds through the Fully Accessible Route topped INR 3.5 trillion, a record high, according to data from Clearing Corp. of India Ltd. at 1413 IST. Of this, INR 119 billion worth of purchases were due to the reclassification of bonds in this channel. FPIs hold INR 63.75 billion of the 6.68%, 2040 gilt, INR 54.87 billion of the 7.24%, 2055 and INR 500 million of the 7.71%, 2066 gilt through the route. The Reserve Bank of India added all three bonds to the Fully Accessible Route Jun. 5.
The rise in gilt purchases by FPIs comes after the Centre and Reserve Bank of India announced a slew of measures to incentivise foreign investments in government bonds. Since Jun. 5, FPIs' net holdings of Fully Accessible Route gilts have surged by INR 269.09 billion to the record figure, reflecting robust purchases along with the reclassification. Consequently, the investment into central government securities under the General Route fell to INR 428.70 billion, down over INR 121 billion from Friday, according to CCIL data.
"I expect the number to go up to around INR 4 trillion - INR 4.5 trillion," a dealer at a private sector bank said. "But most of it will depend on the index inclusion (of India to Bloomberg's flagship bond index). If the inclusion happens, we could see a 15-basis-point spread compression across the G-sec curve."
Market participants estimate a potential inflow of $20 billion to $25 billion over the course of about a year if Indian gilts are included in Bloomberg's flagship Global Aggregate Index. The review is expected this month.
After the RBI amended its rules to include the three existing bonds under the Fully Accessible Route, Bloomberg Fixed Income Indices also added them to its Emerging Market Local Currency Government Index and other eligible indices on Tuesday. FPIs have expressed interest in Indian gilts, with Canada-based Manulife Investment Management considering the possibility of further increasing allocation to gilts post the RBI and Centre's steps.
On Jun. 5, the Centre waived the 20% withholding tax on interest earned by foreign investors from Indian government bonds, and also removed capital gains tax on these securities. Going forward, the RBI has also allowed all new issuances of 15-year, 30-year, and 40-year gilts to be included under the Fully Accessible Route. The central bank also said all new five-year, seven-year, 10-year, 15-year, 30-year, and 40-year green bond issuances would be made eligible under this route. End
US$1 = INR 94.71
Reported by Janwee Prajapati
Edited by Avishek Dutta
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