New Delhi: The Reserve Bank of India (RBI) is now looking to stabilize the domestic debt market by relaxing investment rules for Foreign Portfolio Investors (FPIs). This development comes at a time when the government is actively seeking to woo back investors to India’s growth story after FIIs encashed billions from the equity markets last year.
Earlier, foreign funds that wanted to buy Indian Government Securities (G-secs) had to navigate a complex maze of caps designed to prevent foreign money from distorting the market. The FPIs could invest only up to a certain cap of their total portfolios in short-term government bonds. With this rule largely done away with, global funds now have greater access to the Indian bond markets, allowing them the flexibility to buy G-secs as easily as they do with Western bonds.
Furthermore, the government has addressed the long-standing confusion between ‘general’ and ‘long term’ FPI debt buckets into a single investment limit category for Central Government Securities and State Government Securities. The government has eased its Fully Accessible Route (FAR) the framework that allowed foreign investors to buy Indian bonds with zero quantitative limits.
The FAR, introduced in 2020, has already helped the Indian bond market to invest in certain government bonds. This helped Indian bonds to get included in the world’s biggest bond indices, including JPMorgan’s Emerging Market Bond Index and FTSE Russell’s Emerging Markets Government Bond Index.
This has helped attract more investments to G-secs, as Indian bonds now meet the guidelines set by these indices.
But the government isn’t done yet.
“Although we have confined it at the moment only to the bond market, certainly that is not the end of the story. We will be doing more. We recognise the need for more foreign capital to come in,” Nirmala Sitharaman said on the sidelines of the Mindmine Summit 2026 in New Delhi.
