Ample space for FPIs in debt, says RBI after exclusion of some bonds from FAR category
Reserve Bank of India deputy governor Michael Patra, ten days after the central bank excluded new issuances of 14-year and 30-year sovereign bonds from the Fully Accessible Route.
“All the existing securities issued are available for FAR investment. So, that makes Rs 41 lakh crore of available investment, of which investment today is only Rs 2 lakh crore. There’s an ample amount of space to go,” Patra said at a press conference after the RBI’s monetary policy statement on Thursday.
“Our assessment is that in the categories that are now allowed, there are going to be Rs 4 lakh crore of new issuances, which are open to FAR,” he said.
The introduction of the Fully Accessible Route category of government bonds has been cited by JP Morgan and Bloomberg as a major reason for including Indian sovereign debt in their bond indices. The RBI had introduced the category in 2020. Only FAR bonds are eligible for inclusion in the global bond indices.
«It’s not as terrible as it’s made out to be. Our hope is that concentrating them into this five-to-ten-year segment will actually make it more liquid and better price discovery will occur and transaction costs will fall as depth increases,” Patra said.
On July 29, the central bank said that following consultations with the government, it had been decided to exclude new issuances of 14-year and 30-year sovereign bonds from the FAR category.
“On the question of the exclusion of securities from the FAR, we have observed that the major part of the interest of FAR investors is in
