RBI opens 15-, 30- and 40-year bonds to foreign investors

The Reserve Bank of India said it will include all new 15-year, 30-year and 40-year government bond issuances under the Fully Accessible Route, remove limits on short-term investments and concentration norms for foreign portfolio flows, and provide concessional foreign-exchange swap facilities for state-run external commercial borrowings and for banks raising FCNR(B) deposits until Sept. 30.

The central bank said the measures aim to boost dollar inflows, improve access to overseas capital and support government borrowing programmes as the rupee faces pressure from higher crude prices and heavy domestic equity outflows.

The RBI noted bonds newly included under the Fully Accessible Route are already part of three major global bond indexes, a factor it said should widen the pool of international investors able to buy Indian sovereign debt. Limits related to short-term investments, concentration norms and individual securities under the general route will be removed.

Regulatory changes raise limits for Non-Resident Indians and Overseas Citizens of India to invest in equity instruments traded on Indian exchanges without SEBI registration, and extend the same facility to all individual Persons Resident Outside India.

To increase foreign-currency inflows, the central bank will offer a concessional foreign-exchange swap facility for external commercial borrowings raised by state-run companies until Sept. 30. A similar swap will be available for banks mobilising FCNR(B) deposits with maturities of three to five years; the RBI will bear the full hedging cost for these transactions until that date.

The RBI restored the time allowed for realisation of export proceeds to nine months to ease exporters’ foreign-exchange management.

RBI Governor Sanjay Malhotra noted the package, together with tax benefits announced by the government earlier in the day, is expected to support foreign participation in government borrowing programmes.

The announcements follow stronger US data that pushed the dollar higher. Private-sector employment rose by 122,000 jobs in May, above forecasts, and the ISM services purchasing managers’ index climbed to 54.5 from 53.6 in April. The US Dollar Index traded above 99.50, its highest since early April, and market participants remained cautious on equities.