The Finance Ministry hopes that foreign portfolio investors’ (FPIs) exposure to the domestic bond markets will rise from the present 65 per cent of their permissible ceiling of $51 billion. “Against the $51 billion ceiling that FPIs have, their coverage is only 65 per cent now. With the ongoing reforms, especially after the Reserve Bank’s August 25 circular, we are hopeful this gap will be filled,” Ajay Tyagi, Additional Secretary, Investments, in Finance Ministry, told reporters.
Addressing the BRICS Bond Market summit in Mumbai, he also said the government expects the recent decision to allow FPIs to invest in unlisted companies and securitised receipts, to boost their exposure to the corporate bond market.
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The domestic bond market, excluding the G-secs, is worth around Rs 20 trillion, while the G-secs is a much larger one given the government’s building debt-driven balancesheet.
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“Foreign portfolio investors are already allowed to invest in unlisted companies so we hope that it goes through $51 billion total cap,” he said.
However, he was quick to add that the RBI amendments are being examined now.
In its bid to deepen the corporate bond market, the Reserve Bank had on August 25 issued a circular that allowed banks to issue Masala bonds and also to accept corporate bonds under liquidity adjustment facility.
The changes were part of the slew of changes in the fixed income and currency markets.
“These measures are intended to further deepen market development, enhance participation, facilitate greater market liquidity and improve communication,” the RBI had said.
These measures were part of the steps taken by previous RBI Governor Raghuram Rajan for deepening the debt market.
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