Mumbai: In a significant move, the Reserve Bank of India notified that 14- and 30-year government bonds will not be available for subscription via the Fully Accessible Route (FAR) for foreign portfolio investors (FPIs) further limiting access to g-secs for investors in this category.
To be sure, this rule only applies to freshly issued securities. However, existing securities with a 14- and 30-year tenor that are included in the specified securities category under FAR will remain accessible to FPIs, the RBI said.
Currently, FPIs hold 6 per cent of 14-year g-secs and 4.3 per cent of 30-year g-secs, according to data shared by Nirmal Bang Securities.
The move is expected to divert FPI attention towards g-secs with a higher tenure than 14- and 30-year bonds, the brokerage said. Currently, the demand for 14- and 30-year g-secs is higher than the limited FPI demand, according to Nirmal Bang Securities.
The move is also aimed at in creasing FPi participation in shorter term g-secs to make the yielf curve more flexible, the Bloomberg reported, citing officials.
How many g-secs issued so far in FY25
In the first half of FY25, the issuance of 14-year bonds was zero, while 30-year bond issuance was also limited. To compare, the issuance of 14-year g-secs stood at zero in H1FY25, compared to Rs 1,560 billion in H1FY24 and Rs 1,350 billion in H1FY23.
The issuance of 30-year g-secs was down to Rs 670 billion in H1FY25, compared to Rs 1,470 billion in the year-ago period, and Rs 1,120 billion in H1FY23. Meanwhile, 15-year g-sec issuance rose to RS 1,040 billion in H1Fy25 from 0 in the previous 2 years. Similarly, 50-year bonds worth Rs 670 billion were issued in H1FY25 compared with zero in the previous 2 years.
Overall, the value of government securities issued in H1FY25 rose to Rs 7,500 billion from RS 8,880 billion in the year ago period and Rs 8,450 crore in H1FY23. There are 2 other routes for investment in g-secs, namely, medium term framework and voluntary retention reoute.
The Reserve Bank of India has ordered curbs on the purchase of 14-year and 40-year government securities (g-secs) via Fully Accessible Route (FAR) by foreign portfolio investors (FPIs). Here’s why Biz News Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
